Palm hits one-year low on financial crisis fears
Growing stocks in top palm oil producers Indonesia and Malaysia are also weighing on palm oil prices, which are set for their third straight quarterly loss.
But some traders say prices may get a boost if India, which celebrates the Diwali festival at the end of October, makes last-minute purchases of the edible oil.
"The landscape has changed so much in the past few weeks," said a trader with a foreign brokerage in Kuala Lumpur.
"Palm oil traders are looking at cues on how the euro zone leaders will solve these debt problems rather than focusing on the fundamentals," he added.
Benchmark December palm oil on the Bursa Malaysia Derivatives Exchange dropped as much as 2.1 percent to 2,850 ringgit ($901) a tonne -- the lowest since Oct. 8 last year. The market settled at 2,898 ringgit.
Overall volumes stood at 26,284 lots of 25 tonnes each, compared to the usual 25,000 lots.
Traders are looking out for Malaysia's palm oil export data for September, which is due on Friday that is expected to be lower than August but has shown some recovery compared to the sharp declines at the start of the month.
The market is pegging September exports at 1.52 million tonnes, down 6.2 percent from a month ago. In the first ten days of September, exports slumped 36 percent from the same period in August.
With the Hindu festival of Diwali expected on Oct. 26, price-sensitive India is bound to come in, traders say.
"We see a lot of consumer buying coming in whenever the market dips below the 2,900 ringgit level," said another trader in Malaysia.
"Also, the Chinese (buyers) have hedged it well," the trader added, in reference to concerns that China could cancel earlier contracts after the market fell sharply.
Brent crude fell to near $103 on Thursday, declining for a second day after a bigger-than-expected increase in US stockpiles heightened concern that demand may slow and doubts over the euro zone rescue fund weighed on confidence.
Investors are eyeing the result of European Union and International Monetary Fund inspectors' visit to Greece to decide whether Athens has done enough to secure new funds.
The market was also tracking German Chancellor Angela Merkel's move to defuse a revolt within her government before a crucial vote on Thursday to enhance the powers of Europe's bailout fund.
The gloomy market outlooks also affected other vegetable oil prices although there was some recovery later in the day. US soyoil for October delivery was flat after falling earlier. China's most active May 2012 soybean oil contract tumbled 2.1 percent.
Copyright Reuters, 2011