25/10/2012 (Reuters) - Malaysian palm oil futures inched up on Wednesday as investors bet on increased festival demand for the tropical oil, although prices were locked in a tight range due to lingering concerns over record-high stocks.

The upcoming Diwali festival celebrated by major vegetable oil importer India could lead buyers to snap up palm oil, easing a growing stockpile in the world's No.2 producer.

In addition, cargo surveyor data showing Malaysia's palm exports grew as much as 17 percent for Oct. 1-20 from a month ago also lifted sentiment. 

"Exports were good, but inventory is still on the high side," said a trader with a foreign commodities brokerage in Malaysia.

"But production should be toppish in the last quarter as we move into the monsoon season, while at the same time demand is picking up because of the festive season," he added.

Palm oil production hits a seasonal peak in the last quarter of the year before slowing, lifting traders' hopes this will reduce stocks from a record high of 2.5 million tonnes in September.

The benchmark January contract on the Bursa Malaysia Derivatives Exchange edged up 1.5 percent to close at 2,578 ringgit ($842) per tonne. Prices traded in a tight range between 2,551 and 2,578 ringgit per tonne.

Total traded volumes stood at 20,953 lots of 25 tonnes each, thinner than the usual 25,000 lots.

Technical analysis showed a bullish target for Malaysian palm oil remains unchanged at 2,676 ringgit per tonne, said Reuters market analyst Wang Tao.

Palm oil prices are expected to rise sharply in the coming months on brisk buying interest as global importers seek cheaper alternatives to competing soyoil, said Hamburg-based oilseeds analysts Oil World on Tuesday.

Analysts also say the Malaysian government's move to slash export taxes on crude palm oil and scrap duty free export quotas on the crude grade in January 2013 could benefit industry players in the long term.

"Despite the short-term pain for upstream players, we reckon the change is positive for the long run as it should result in better CPO prices after the high inventory is reduced," Kenanga Investment's Alan Lim Seong Chun said in a research report on Wednesday.

In a bullish sign for palm oil, Brent crude rose on Wednesday, snapping a six-day losing streak, after economic data from China suggested a gradual recovery in the world's No. 2 oil consumer, though weak European data kept the gain slim.

In other vegetable oil markets, U.S. soyoil for December delivery inched up 0.6 percent in late Asian trade. The most-active May 2013 soybean oil contract on the Dalian Commodity Exchange closed 0.1 percent higher.

  Palm, soy and crude oil prices at 1004 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      NOV2    2468   +31.00    2440    2468     105
  MY PALM OIL      DEC2    2539   +43.00    2511    2539    2044
  MY PALM OIL      JAN3    2578   +38.00    2551    2578   13027
  CHINA PALM OLEIN MAY3    7330   +56.00    7250    7330  285330
  CHINA SOYOIL     MAY3    9284    +6.00    9242    9296  437228
  CBOT SOY OIL     DEC2   51.62    +0.30   51.35   51.79    7788
  NYMEX CRUDE      DEC2   86.76    +0.09   86.26   87.47   35399

  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=3.06 ringgit)