30/05/2012 (Reuters) - Malaysian palm oil futures climbed to a near two-week high on Tuesday as investors cited a rebound from a sell-off on the euro zone debt crisis, while expectations of dry weather conditions in soybean-growing regions in the United States also supported prices.

The euro hovered near a two-year low as investors worried about Spain's banking problems, the outcome of the Greek elections and the health of the global economy.

The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange closed 1.1 percent higher at 3,178 ringgit ($1,000) per tonne. Prices have slipped about 8 percent this month.

Traded volumes stood at 15,689 lots of 25 tonnes each, compared with Monday's total at 14,730 lots.

"It was over-sold to begin with," said a Singapore-based analyst. "If you look at soybean prices, it has been quite resilient, so palm has been over-shooting to the downside. 

"If you have a world (economic) crisis, you still need people to eat ... if there is no supplier, then prices will shoot up regardless."

Last week, the lack of any significant breakthrough in resolving the debt crisis in Europe weighed on palm prices, sending the benchmark down to its lowest level this year at 2,993 ringgit per tonne.

Prices rose as high as 3,193 ringgit on Tuesday, the highest level since May 16, and traders say they are likely to hit 3,200 before the end of May.

In related markets, corn and soybeans firmed as some weather models forecast crop-stressing heat in the U.S. Midwest this week.

In other vegetable oil markets, the most active Dalian soyoil September contract added 0.5 percent.

"It was over-sold," said a Kuala Lumpur-based trader. "The fundamentals have been positive, even when we fell to 2,993. On the technical side, we have posted a bottom, so sentiment has shifted back to positive." 

Traders also said there was some buying after leading palm oil buyer India, looked likely to end its freeze on the base import price of refined vegetable oils.  

"There is also some talk about India wanting to raise import products' base prices. Maybe some buying or covering before India raises base prices," said a second Kuala Lumpur-based trader. "Palm oil is more in consolidation mode after last week's sharp falls.

"There is not as much concern and fear about Europe. Maybe we can see some light at the end of the tunnel."

Also helping boost palm prices, according to traders, was a rise in demand from India and Pakistan for Ramadan, where fasting in the day is followed by feasting in the evening.

Crude oil fell towards $106 a barrel on Tuesday as the deepening euro zone debt crisis hurt the outlook for global fuel demand, counterbalancing bullish sentiment from renewed fears of Middle East supply disruptions.  

     Palm, soy and crude oil prices at 1038 GMT 

  Contract        Month    Last   Change     Low    High  Volume         
  M'ASIA PALM OIL  JUN2    3142   +23.00    3100    3150     327         
  M'ASIA PALM OIL  JUL2    3170   +23.00    3140    3193    2383         
  M'ASIA PALM OIL  AUG2    3178   +34.00    3135    3193   15689         
  M'ASIA PALM OIL  SEP2    3172   +36.00    3130    3189    6214         
  DALIAN SOY OIL   JAN3    9366   +58.00    9286    9382  331260         
  CBOT SOY OIL     JUL2   50.44    +0.32   50.05   50.63    7422         
  NYMEX CRUDE      JUL2   91.13    +0.27   90.86   91.99   43365         
   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 = 3.1420 Malaysian ringgits)