Palm oil fell to the lowest level in more than a week as crude oil declined, reducing the appeal of vegetable oils as feedstock for biofuels.

The contract for July delivery fell as much as 1.2 percent to 2,258 ringgit ($740) a metric ton on the Bursa Malaysia Derivatives, the lowest price for most-active futures since April 23, and ended the morning session at 2,268 ringgit. Futures declined 3.9 percent in April.

West Texas Intermediate crude traded near the lowest level in more than a week after government data showed U.S. stockpiles climbed to the highest in 82 years. A record 5.6 million tons of palm oil was used for fuel in 2012, according to Oil World, a Hamburg-based research company.

“Crude oil weakened quite substantially and that will affect biodiesel demand for palm oil,” said Alan Lim Seong Chun, an analyst at Kenanga Investment Bank Bhd. Futures also declined after soybean and soybean oil prices fell, he said.

“Because these two products are usually used as substitutes, cheaper soybean oil may not bode well for price outlook for crude palm oil,” Lim said.

Soybeans for July delivery were little changed at $13.7325 a bushel on the Chicago Board of Trade, after declining 1.9 percent yesterday. Soybean oil was at 48.79 cents a pound from 48.85 cents yesterday. Soybean oil’s premium over palm was at $333.26 a ton today, according to data compiled by Bloomberg.

Refined palm oil for September delivery retreated as much as 2.1 percent to 5,826 yuan ($947) a ton on the Dalian Commodity Exchange, the lowest price for the most-active contract since October 2009. Soybean oil fell 1.5 percent to 7,194 yuan a ton, poised for the lowest close since February 2010.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Source : Bloomberg