18/01/2012 (Business Recorder) - Malaysian crude palm oil futures bounced back on Tuesday, as concerns over dry weather that could potentially tighten soyoil supplies in Argentina and Brazil offset investor fears about the euro zone debt crisis.

Argentina's drought will worsen this week, say local meteorologists, dashing hopes that rain in the days ahead might be strong enough to revive parched corn and soy fields.

"It looks like the dry spell is back in South America, however weak technicals and still lagging exports are likely to limit the upside here," said a dealer with a foreign commodities brokerage in Malaysia.

But investors are also keeping a close watch on the euro zone debt crisis that weighed on palm oil futures, which are down 0.3 percent so far this year.

Benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange jumped 1.2 percent to close at 3,164 ringgit ($1013) per tonne.

Prices dropped to 3,099 ringgit the previous day, a level last seen on December 22.

"After being down by more than 100 ringgit, the market is making a retracement as it was oversold," said another trader with a foreign commodities brokerage.

Traded volumes stood at 25,785 lots of 25 tonnes each, slightly higher than the usual 25,000 lots as some traders are evening out their positions before the Lunar New Year holidays next week.

Malaysian palm oil may revisit the January 3 high of 3,244 ringgit per tonne based on technical analysis, said Reuters analyst Wang Tao.

The Malaysian weather office did not issue any heavy rain warning but the market is watching closely as floods could complicate the delivery of palm oil from plantations to ports and refineries.

A slowdown in demand as top buyers, including China and India, cut back orders helped ease pressure from tightening stocks.

Malaysia's palm oil exports posted an 11 percent drop for the first 15 days in January to levels below 600,000 tonnes, said cargo surveyors Intertek Testing Services and Societe Generale de Surveillance.

Export data based on ships leaving six ports on the Island of Sumatra showed December exports declined 29 percent to 1,041,491 tonnes compared to November.

The US soyoil contract for March delivery jumped 1.7 percent while the most active September 2012 soyoil contract on China's Dalian commodity exchange inched up 0.8 percent.