FCPO Related News (Wed, Feb 27)

KUALA LUMPUR, Feb 26 (Reuters) - 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 losses. 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 inggit 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.

Today’s Support and Resistance for benchmark May contract is located around 2,394 and 2,440 respectively.