Palm oil traded near the lowest level in more than two months as exports from Malaysia fell and declining soybean oil prices spurred consumers to switch to the alternative oil for use in food and fuel.

The contract for March delivery ended the morning session little changed at RM2,494 a tonne on the Bursa Malaysia Derivatives, paring gains of as much as 0.9 per cent. Futures tumbled to RM2,486 on January 13, the lowest since October 29. The market was closed for a holiday yesterday.

Shipments from Malaysia, the second-largest producer, fell 28 per cent to 460,248 tonnes in the first 15 days of January from the same period last month, surveyor Intertek said today.

Exports to India and the subcontinent dropped 53 per cent to 44,000 tonnes while shipments to China declined 8.5 per cent, the estimates show. Demand typically slows during the winter as the tropical oil clouds in cooler temperatures.

"The selling pressure is coming because the export data is not good," said Rajesh Modi, a trader at Sprint Exim Pte in Singapore. "The difference between palm and other oils has been narrowed. Buyers are buying more soybean and sunflower oils."

Soybean oil's premium over palm was at US$73.90 a tonne today, compared with an average of US$234.12 in the past year and almost a three-year low of US$47.25 on January 3, data compiled by Bloomberg show. Soybean oil for March delivery was little changed at 37.74 cents a pound on the Chicago Board of Trade. Futures fell to 37.42 cents on January 8, the lowest price since July 2010. Soybeans were also little changed at US$13.0725 a bushel.

Palm oil may rally to RM2,800 in the first quarter as increasing demand, a low-output cycle and the possibility of heavy rainfall hampering harvesting may reduce stockpiles, Tan Sri Lee Shin Cheng, chairman of IOI Corp, said today.

Refined palm oil for May delivery dropped 1.1 per cent to 5,786 yuan (US$957) a tonne on the Dalian Commodity Exchange. Soybean oil retreated 0.8 per cent to 6,604 yuan.-- Bloomberg