31/07/2012 (Reuters) - Malaysian crude palm oil edged to a one-week high on Monday, tracking gains in broader financial markets on expectations the Federal Reserve and European Central Bank (ECB) will announce new measures to encourage growth, boosting commodity demand.

Persistent drought in the U.S. Midwest that threatened soy crop yields also supported prices, with traders expecting a crop downgrade in the weekly progress report by the U.S. Department of Agriculture (USDA), due later on Monday.

Tighter soy crop supply leading to less soybean oil could shift vegetable oil demand to the cheaper palm oil.   

"Euro zone worries have eased a little and rain that was anticipated in the U.S. did not match expectations," said a Singapore-based trader with a foreign commodities house. "But we will have to wait and see tonight's USDA crop progress report for price direction." 

The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange closed 2.7 percent higher at 3,005 ringgit ($954) per tonne. Prices earlier touched 3,007 ringgit, the highest level since July 23.

Traded volume stood at 24,699 lots of 25 tonnes each, a tad lower than the usual 25,000 lots.

Technicals turned bullish as palm oil broke a resistance at 2,987 ringgit and could trigger a gain to 3,021 ringgit, Reuters market analyst Wang Tao said.

Investors are hoping Fed and ECB policy meetings this week will produce stimulus measures, especially after ECB President Mario Draghi pledged he would do whatever it takes to safeguard the euro.

On the local front, market players will be looking out for Malaysia's July palm oil export data after earlier numbers showed signs of slowing demand.

Malaysia's palm oil exports fell 14.3 percent and 18.6 percent over the July 1-25 period, according to cargo surveyors Intertek Testing Services and Societe Generale de Surveillance respectively. 

Malaysia will increase shipping quotas for tax free crude palm oil by up to 2 million tonnes this year to help planters cope with higher output in the next few months, government sources said, as the world's No.2 supplier struggles to maintain its export momentum.

Brent crude oil fell to around $106 a barrel on Monday, erasing early gains, boosting palm oil prospects to be used as biodiesel.

Other vegetable oil markets also extended gains thanks to  the better macroeconomic outlook.

By 1007 GMT, the most active U.S. soyoil contract for December  delivery had inched up 1.2 percent and the most active January 2013 soyoil contract on the Dalian Commodity Exchange had jumped 1.7 percent.  

  Palm, soy and crude oil prices at 1008 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      AUG2    2985   +84.00    2910    2985     517
  MY PALM OIL      SEP2    2994   +79.00    2950    2998    2444
  MY PALM OIL      OCT2    3005   +78.00    2958    3007   16473
  CHINA PALM OLEIN JAN3    7852  +136.00    7784    7924  285630
  CHINA SOYOIL     JAN3    9524  +158.00    9464    9592  584350
  CBOT SOY OIL     DEC2   53.42    +0.61   53.01   53.70    9703

  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
  ($1=3.15 Malaysian ringgit)