VEGOILS Palm hits 10-week closing high on tight supply woes

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  • China New Year demand, weak output to cap stockpile rise
  • End-Jan stocks seen down 4.5% to 1.51 mln T -analyst
  • Prices seen firm at 4,500-5,500 RGT/T in Jan.

KUALA LUMPUR, Jan 11 (Reuters) - Malaysian palm oil futures reversed losses and hit a near 10-week closing high on Tuesday, underpinned by concerns over tight supply after official numbers showed a sharper-than-expected decline in December inventories.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange settled up 43 ringgit, or 0.8%, at 5,069 ringgit ($1,210.50) a tonne, its highest closing since Nov. 3.

End-December palm oil stockpile in the world's second largest producer fell more than expected, down 12.9% from the month before, as production nosedived while domestic consumption jumped, Malaysian Palm Oil Board data showed on Monday, further tightening inventories for 2022. [nL1N2TQ07C}

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Exports during Jan. 1-10 fell 40.6% to 325,601 tonnes from the same period in December, cargo surveyor Societe Generale de Surveillance said.

Going ahead, stockpiles are expected to remain tight in the seasonally slow output period and on healthy demand from China ahead of its New Year festivities, Shahira Rahim, an analyst with MIDF Research, said in a note.

CGS-CIMB Research projected stocks to decline by 4.5% month-on-month to 1.51 million tonnes by end-Jan 2022, with output and exports falling 12.5% and 20% respectively.

"Given the tight near-term global edible oil supplies and unresolved labour shortage issue in the palm oil industry in Malaysia, we predict crude palm oil prices to remain firm at 4,500-5,500 ringgit per tonne in January 2022," Ivy Ng, regional head of plantations research at CGS-CIMB Research, said in a note.

Prices could remain high till the first quarter before trending lower as supply recovers and crushing activities of oilseeds improve, she said.

Top producer Indonesia is expecting higher-than-usual rainfall to continue this year, which may disrupt harvesting and hurt output. read more

Dalian's most-active soyoil contract gained 0.8%, while its palm oil contract rose 1%. Soyoil prices on the Chicago Board of Trade were up 0.7%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

($1 = 4.1900 ringgit)

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Reporting by Mei Mei Chu; Editing by Subhranshu Sahu and Amy Caren Daniel

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