KUALA LUMPUR, Jan 21: Malaysian crude palm oil futures fell 2.2 per cent on Monday, hitting one-week lows as the U.S. crude market dropped below $90 a barrel and cargo surveyors announced dismal export numbers.

Palm oil prices, which reached a historic high of 3,420

ringgit last week, had hurt exports for the vegetable oil, commonly used in products ranging from body lotion to ice-cream.

And with crude oil falling past $90, demand for the more-expensive rival, palm-based biodiesel, has taken a bigger hit, traders said.

The benchmark April contract on the Bursa Malaysia Derivatives Exchange settled down 73 ringgit to 3,243 ringgit ($986) per ton, after going as low as 3,232 ringgit, a level not seen since Jan. 11.

Crude is drawing back into negative territory and exports are weak -- both these two factors make it essential for a correction in palm oil prices, said a head trader in a foreign commodities brokerage. There will be further liquidation in the coming days. Other traded months fell between 55 and 85 ringgit.Overall trade stood at 11,071 lots of 25 tons each.

Exports of Malaysian palm oil products for Jan. 1-20 fell 40.02 per cent to 567,583 tons from 946,210 tons shipped between Dec. 1 and 20, cargo surveyor Intertek Testing Services said on Monday.

Palm-based biodiesel is much more expensive than mineral diesel and companies are slowing down on their purchases, said an official from a leading plantation firm.

Crude palm oil now costs nearly $1,000 a ton, while petroleum-based diesel fuel in Singapore trades at $766.

The European Union’s tough stand on palm-biodiesel imports is unlikely to reduce prices and booming demand for the commodity, top analyst Dorab Mistry said on Monday.

It will simply mean that other oils will be used for biodiesel and palm will fill in the gap for edible demand, Mistry told Reuters in an interview.

Traders estimate around 60-70 per cent of current export demand comes from the food sector.

In Malaysia’s physical market, crude palm oil for January shipment in the southern region was quoted at 3,260/3,265 ringgit a ton. Trades were done between 3,255 and 3,270 ringgit.—Reuters