Kuala Lumpur: Malaysian palm oil futures could fall below 2,500 ringgit (RM) over the coming weeks if the spread of a deadly coronavirus in China continues to disrupt travel and normal activity in the world’s second-largest palm oil importer, brokers and traders said.The fast-spreading virus, which has so far claimed more than 350 lives and infected more than 17,000 people in two dozen countries, has raised fears of a sustained disruption in supply chains and eating habits in the world’s most populous nation and second-largest economy.Dalian palm oil futures plunged by their daily limit of 7% on Monday as trading resumed after an extended Lunar New Year break but still have further to fall to match the roughly 11% decline in benchmark Malaysian palm oil futures over China’s holiday period.Also read: India’s Restrictions on Palm Oil to Keep Out Malaysia Have Halted Nepalese Exports as WellPalm prices had already been under pressure from January 8 when top palm oil buyer India restricted imports of refined grades and informally stopped all purchases from Malaysia over a diplomatic spat between the two nations.“The bear is out of hibernation,” said Paramalingam Supramaniam, director at Selangor, Malaysia-based brokerage Pelindung Bestari Sdn Bhd.Malaysia’s benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange plunged 14.9% in January, its biggest monthly drop since August 2014.The contract was up 1.2% at RM 2,634 per tonne on Monday, after dropping nearly 9% last week.Five traders told Reuters they expect palm oil to fall to between RM 2,470 and RM 2,575 a tonne within the coming weeks.Prices had overextended to the upside in an end-2019 rally and are now coming back down, said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.The tropical oil climbed 46.7% from Oct. 1 to Jan. 6 to three-year highs of RM 3,133 a tonne on expectations of lower production in both Indonesia and Malaysia due to dry weather and lower fertiliser use.Lower demand, though, from top consumers India and China have taken a toll on prices since then, despite falling inventories in Malaysia, and Paramalingam said the market will remain bearish until fresh demand starts to emerge.Meantime, brokers are taking on more short positions, a Kuala Lumpur-based trader said.Open interest across all Malaysia palm oil contracts grew by roughly 30,000 contracts in January as prices retreated from above RM 3,100, indicating a gain in shorts.“When fear (of the virus outbreak) takes over, (falling) end-stocks are no solace. Nobody wants to try to catch a falling knife,” Paramalingam said.Malaysia’s palm oil stocks hit a 27-month low of 2.01 million tonnes at end-December, down 11% from end-November, the Malaysian Palm Oil Board said in January.