18/07/2012 (Reuters) - Malaysian crude palm oil futures ended lower on Tuesday as traders booked profits from the previous day's rally, and the market could resume its advance as persistent hot and dry weather in the United States reduced global oilseeds supply.

Heat from the worst drought seen since 1956 has severely damaged soybeans, with the U.S. Department of Agriculture rating the crop at 34 percent good-to-excellent, down 6 percentage points from the previous week.

A lower quality soybean crop may lead to less soybean oil, which would shift demand to refined palm oil especially as it is trading at a discount of above $200.

"The market is caught between weak internals and strong externals," said a trader with a local commodities brokerage in Malaysia.

"On the domestic front, we have better production for July and the export numbers are shrinking. But externally, the stronger grain prices have made palm attractive in the international market."     

The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange fell 1.9 percent to close at 3,062 ringgit ($968) per tonne, pressured by last-minute selling.

Traded volumes stood at 24,317 lots of 25 tonnes each, a tad lower than the usual 25,000 lots.

Cargo surveyor Intertek Testing Services reported a 21 percent decline in Malaysian exports for the first 15 days of the month. Another cargo surveyor, Societe Generale de Surveillance, reported a 26.1 percent drop in exports for the same period compared to last month.    

Exports to China suffered the steepest decline, although demand is still expected to pick up due to various festivals, starting with the Muslim fasting month of Ramadan this week and with China and India celebrating key holidays from September to November.   

Traders are also watching the possibility of an El Nino weather pattern returning to Southeast Asia, as it could hurt palm oil output for top producers Indonesia and Malaysia. 

But climate indicators for an El Nino event in the western Pacific have eased slightly in the past fortnight, although meteorologists still expect the weather pattern to form late in 2012.  

Brent crude oil rose to $104 a barrel on Tuesday, a bullish factor for palm oil which can be diverted to make biofuel, making it more expensive for food use.

Other vegetable oil markets also traded lower, retreating from weather-fuelled rallies seen the previous day. By 1006 GMT, the most active U.S. soyoil for December delivery fell 1.1 percent and the most active January 2013 soyoil contract on the Dalian Commodity Exchange inched down 0.3 percent.   

  Palm, soy and crude oil prices at 1007 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      AUG2    3052   -48.00    3052    3106     640
  MY PALM OIL      SEP2    3056   -58.00    3053    3117    3567
  MY PALM OIL      OCT2    3062   -60.00    3061    3130   15115
  CHINA PALM OLEIN JAN3    8154   -82.00    8120    8292  305624
  CHINA SOYOIL     JAN3    9828   -32.00    9752    9928  743520
  CBOT SOY OIL     DEC2   54.88    -0.61   54.74   55.69   12687
  NYMEX CRUDE      AUG2   88.49    +0.06   88.06   88.75   21896

  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=3.163 Malaysian ringgit