Palm oil dropped, tracking crude oil prices that traded near the lowest level in 10 weeks after an end to protests in Egypt eased concern that oil shipments from the Middle East will be disrupted.
 
The April-delivery contract lost 0.6 percent and closed at 3,933 ringgit ($1,288) a metric ton on the Malaysia Derivatives Exchange in Kuala Lumpur. Prices advanced 1.5 percent last week.

Crude oil slipped 1.3 percent on Feb. 11 after Egyptian President Hosni Mubarak stepped down and handed power to the military after an 18-day revolt. Futures in New York rose to a two-year high last month on concern supply through Egypt’s Suez Canal may be interrupted and unrest may spread to other parts of the Middle East.

“Soy and crude fell last Friday on the news of Egypt after Mubarak relinquished his power,” Ker Chung Yang, an analyst at Phillip Futures Pte, said in a reply to e-mailed questions. “This is likely to weigh on crude palm oil prices.”

Palm oil is a substitute for soybean oil in food and fuel uses and shifts in energy costs can influence prices of the tropical commodity in Kuala Lumpur.

Today’s decline in palm oil prices may be limited because inventories in Malaysia, the second-largest producer, fell to a six-month low in January and production is likely to be affected if wet-weather conditions persist in Malaysia, said Ker.

Stockpiles shrank to 1.4 million tons, the smallest amount since July, the Malaysian Palm Oil Board said on Feb. 10. Output declined 14.2 percent to 1.06 million tons, the lowest level in almost four years, as floods hampered harvesting and cut yields amid the annual low-production season.

‘Supply Crunch’

“Crude palm oil prices will continue to hold up over the first quarter of 2011, given the existing supply crunch in the oilseed industry,” Bernard Ching, an analyst at ECM Libra Capital Sdn., said in a report today.

Most computer models that forecast weather patterns indicate La Nina is likely to persist through the Northern Hemisphere spring, the U.S. Climate Prediction Center said last week. It may continue through August, curbing corn and soybean harvests in China and the U.S., Commodity Weather Group LLC said in a separate report last month.

March-delivery soybeans advanced as much as 0.6 percent to $14.2475 a bushel in Chicago and traded at $14.1925 at 6:04 p.m. Singapore time.