22/10/2012 (Reuters) - Malaysian palm oil futures rose on Friday, with market players confident of a recovery in demand thanks to strong Malaysian exports in the first half of the month and a major festival next month.

"There are more purchases from India and China - India especially - because Deepavali is coming soon. They need to stock up more on palm oil," said Malaysia's Public Investment Bank analyst Chong Hoe Leong, referring to the Hindu festival of lights set for Nov. 13.

"The current crude palm oil price is quite attractive for purchase because it's at the low base," he said, but warned that inventory levels are expected to stay consistently high for the remainder of the year.

At the close, the benchmark January contract on the Bursa Malaysia Derivatives Exchange rose 0.2 percent to 2,501 ringgit ($820) per tonne. Prices have lost more than 21 percent so far since the start of the year.

Total traded volumes stood at 27,875 lots of 25 tonnes each, just slightly higher than the usual 25,000 lots.

For the week, the edible oil was almost flat, as concerns over record stocks offset expectations of stronger demand.

Market players will be watching out for exports numbers for Oct. 1-20 to further gauge demand trend, after both cargo surveyors reported an increase in exports for the first half of the month.   

Despite hopes for an improved exports trend, analysts say inventories, which hit a record high in September, remain worrying as palm oil production shows no signs of slowing, and Malaysia struggles to push out shipments quicker amid weaker global economic growth.

"For next year, it is a bit challenging for palm oil because we can see a slowdown in market activity especially in the major consuming countries," Chong said.

"That will be the major concern for the palm oil market, despite Malaysia recently imposing a lower tax structure starting from next year," he added, referring to the tax cut from the current level of 23 percent per tonne.

In a bullish sign for palm oil, Brent crude futures held steady at above $112 a barrel on Friday, but analysts and traders said a move to the downside was likely because the UK's Buzzard oilfield was expected to restart this weekend while the demand outlook remained weak.

In other vegetable oil markets, U.S. soyoil for December delivery fell 0.2 percent in late Asian trade. The most-active May 2013 soybean oil contract on the Dalian Commodity Exchange were almost flat.   

  Palm, soy and crude oil prices at 1009 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      NOV2    2404    +8.00    2374    2420     331
  MY PALM OIL      DEC2    2475   +19.00    2452    2489    5079
  MY PALM OIL      JAN3    2501    +5.00    2492    2524   16347
  CHINA PALM OLEIN JAN3    6962   +12.00    6960    7012  156920
  CHINA SOYOIL     MAY3    9260    +2.00    9250    9320  409802
  CBOT SOY OIL     DEC2   52.22    -0.07   51.73   52.30   10432
  NYMEX CRUDE      NOV2   92.07    -0.03   91.82   92.32    9631

  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 = 3.05 ringgit)