* External markets pressure palm, but demand expected to
pick up -trader
* Drop of 18 pct seen in Feb palm oil production -trader
* Palm oil to rebound into 2,506-2,521 ringgit range
By Anuradha Raghu
KUALA LUMPUR, Feb 26 Malaysian palm oil futures
slipped on Tuesday to their lowest in more than five weeks, as
weak overseas vegetable oil markets kept investors on edge,
although upbeat export data and slowing production helped limit
China and U.S. soy markets, which are tracked by palm,
remained weak after suffering steep falls on Monday and as
better weather in the U.S. Midwest and South America improved
the prospects for supply.
But stronger-than-expected exports in the first 25 days of
February, buoyed by increased shipments of Malaysian palm oil
products to Europe and India, kept prices from tumbling further.
"The market is a little oversold at the current juncture
after a slew of negative news from pundits and analysts," said a
trader with a local commodities brokerage in Malaysia.
"The external market 'grains' are a major contributor to the
current low prices. We anticipate demand to pick up very soon,
and prices to recover once the selling pressure subside."
The USDA outlook numbers, with projections of a record
soybean crop at 3.4 billion bushels, are bearish, he added.
"This certainly spells trouble for palm oil in the second
quarter of 2013."
The benchmark May contract on the Bursa Malaysia
Derivatives Exchange had dipped to 2,411 ringgit per tonne, the
lowest since Jan. 21, before closing at 2,417 ringgit ($779), a
fall of 2.2 percent.
Total traded volume stood at 35,620 lots of 25 tonnes each,
higher than the average 25,000 lots.
Technicals showed Malaysian palm oil is expected to rebound
into a range of 2,506 to 2,521 ringgit per tonne, as a
correction from the Feb. 20 high of 2,584 ringgit may have been
temporarily completed, said Reuters market analyst Wang Tao.
Investors are pinning hopes on healthy exports alongside
seasonally slowing production to ease the current stockpile of
2.58 million tonnes in Malaysia, the world's No.2 producer.
"At the end of the month we might see an 18 percent drop in
production. And with this kind of exports, we will definitely
see a drawdown in the stocks," said a trader who deals with a
foreign commodities brokerage.
Oil fell below $114 a barrel on Tuesday, hit by doubts over
demand growth as a potential political vacuum in Italy revived
concern over instability in the debt-plagued euro zone.
In competing vegetable oil markets, the U.S. soyoil for May
delivery fell 1.3 percent in late Asian trade. The
most-active September soybean oil contract on the
Dalian Commodity Exchange slipped 1.5 percent.
Palm, soy and crude oil prices at 1019 GMT
Contract Month Last Change Low High Volume
MY PALM OIL MAR3 2388 -31.00 2380 2422 700
MY PALM OIL APR3 2405 -44.00 2398 2452 5112
MY PALM OIL MAY3 2417 -53.00 2411 2474 19638
CHINA PALM OLEIN SEP3 6702 -110.00 6698 6828 734330
CHINA SOYOIL SEP3 8312 -130.00 8306 8448 820498
CBOT SOY OIL MAY3 49.80 -0.64 49.69 50.50 9534
NYMEX CRUDE APR3 92.40 -0.71 91.92 92.65 19779
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1= 3.104 ringgit)
(Editing by Clarence Fernandez)