KUALA LUMPUR, Dec 4: Malaysian crude palm oil ended 1.3 per cent lower on Tuesday, giving up all its gains in the morning session as investors liquidated positions after the US crude market fell further from the $90 level.

Prices of the commodity, used in products ranging from instant noodles and mascara to biofuel, are just 5.8 per cent off a historic high of 3,068 hit last week.

The benchmark February contract on the Bursa Malaysia Derivatives Exchange settled down 37 ringgit to 2,889 ringgit ($865).

Long liquidation is in the cards and players are going to start short-selling, especially if Opec decides to increase output but that may not be the case, said a dealer with a commodities brokerage.

Other traded months ranged between a solid rise of 49 ringgit to a drop of 27 ringgit. Overall trade stood at 10,017 lots of 25 tons each.

Palm oil, up nearly 45 per cent up this year, has been increasingly tracking moves in crude oil markets as it is a feedstock for biodiesel, which is touted as “greener” alternative by many governments.

Palm oil market players were starting to focus on demand-supply fundamentals after getting direction solely from the crude oil markets in the recent weeks, traders said.

Crude oil will be a factor but what the market really needs to find out is the extent of exports diminishing due to the high prices and the supply situation for December since it is supposed to be a month of slowdown, said an official from a plantation firm.

Exports have already started to weaken with cargo surveyors Intertek Testing Services and Societe Generale de Surveillance reporting marginal declines for palm oil demand in November.

As it is, market players expect palm oil stockpiles in the Southeast Asian country to rise 8 percent in November as strong growth in production outpaced a small increase in exports.

In Malaysia’s physical market, crude palm oil for December shipment in the southern region was quoted at 2,900/2,910 ringgit a ton. Trades were done between 2,910 and 2,940 ringgit.—Reuters