10/1/05 KUALA LUMPUR (Dow Jones)--Crude palm oil futures on the BursaMalaysia Derivatives ended sharply lower Monday, following the release ofdata showing a rise in inventories at the end of 2004 and other figuressuggesting the potential for further increases in the coming weeks.

The benchmark March CPO contract ended at MYR1,320 a metric ton, downMYR30 from Friday.

The contract moved between MYR1,319 to MYR1,342. It closed at itslowest level in 16 months.

Traders said the market was under pressure from not only bearishfundamentals but also weak technical indicators and appears to be headedfor further losses in the coming days.

The drop in palm oil prices Monday came as the government-runMalaysian Palm Oil Board reported an increase in palm oil stocks to 1.49million tons at end-December.

The MPOB pegged December production at 1.31 million tons, taking thecountry's output for the entire year to nearly 14 million tons.

December exports were estimated at 1.12 million tons.

The rise in stocks wasn't as large as earlier feared, as marketplayers had been bracing for a total of more than 1.5 million tons.

But traders said the MPOB figures brought little relief to the marketbecause players were concerned that the worst may not be over.

"People are saying that demand in January and February could be bad.China is supposed to be a big buyer now because they have the Chinese NewYear festival coming up in February, but there's no evidence of that yet,"a trader said.

"If they don't buy, then it's quite possible that stocks would stayhigh or even go up further at the end of January."

Concerns about poor January demand were sparked by export estimatesissued by cargo surveyors earlier Monday.

SGS (Malaysia) Bhd reported Jan. 1-10 exports of 303,071 tons, downabout 16% on month, with exports to China falling by more than 60%.

Another surveyor, Intertek Agri Services, reported even lower Jan.1-10 exports of just over 270,000 tons.

Traders said the benchmark contract's breach of the MYR1,330 levelMonday suggests the psychological support of MYR1,300 is likely to betested in the coming days.

Total trading volume was 7,680 lots compared with 3,109 lots Friday.Open interest in CPO futures totaled 27,127 lots at the end of Friday,down from 27,471 lots the previous day.

Prices of palm oil products in the cash market fell in tandem withdeclines in the futures market.

RBD palm olein for January/February/March was last offered at $380,down $5, traders said. Traders said February/March olein was traded at$380.

January CPO, locally delivered, was down MYR35 at MYR1,335, withtrades reported at MYR1,330 and MYR1,340.