25/11/2011 (Reuters) - Malaysian palm oil futures dropped to their lowest in two weeks on Thursday as weak global economic sentiment weighed, with an unsuccessful German bond sale adding to worries that the Europe debt crisis was deepening.

The Germany's bond sale had one of the worst results since the launch of the euro, sending ripples across global markets from stocks to commodities. Palm oil this year has fallen nearly 18 percent so far.

"Dow Jones lost about 200 points yesterday and Dalian, CBOT were down too. All the external factors are pushing palm futures down," said a trader with a foreign commodities brokerage in Kuala Lumpur. 

Benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange closed 1.7 percent lower at 3,108 ringgit ($977) per tonne. Prices fell as low as 3,092 ringgit, a level last seen on Nov. 10.

Overall traded volumes stood at 33,559 lots of 25 tonnes each, much higher than the usual 25,000 lots as more market players came into to sell down their positions.

Technicals remained bearish with Reuters analyst Wang Tao expecting palm oil to extend its losses to 3,050 ringgit per tonne, as indicated by a head-and-shoulders pattern and a Fibonacci retracement analysis.

The Malaysian Meteorological Department issued orange stage warning that heavy rains could persist till Friday and trigger floods in parts of Pahang -- key oil palm growing area that accounts for 15 percent of production.

Palm oil could turn more bullish as heavy rains tend to reduce harvesting rounds in oil palm estates and floods will complicate the transport of the edible oil to mills and refineries. 

The market is bracing for low production, which may last till January 2012, on the back of a seasonal decline in yields and La Nina driven floods during the monsoon season.

But in a sign of slowing demand, China has cancelled orders for up to 300,000 tonnes of refined palm oil over the past month due to over-booked cargoes and lower domestic prices.

Industry sources expect Malaysian exports for Nov. 1-25 to hit 1.34 million tonnes, compared to the 1.37 and 1.40 million tonnes shipped out as reported by cagor surveyors during Oct. 1-25.  

Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will release official data on Friday.

Going against the downtrend in most markets, Brent crude rose above $107 on Thursday, recovering from the previous day's losses, as potential strong winter fuel demand and turmoil in the Middle East offset fears that a global economic slowdown could hurt consumption.  

But the global economic gloom weighed on other vegetable oil markets. China's most active May 2012 soybean oil contract <0#DBY:> dropped 2.9 percent. U.S. soyoil markets were closed for a public holiday on Thursday.

Palm, soy and crude oil prices at 1009 GMT
                                                                   
  Contract                    Month      Last      Change      Low        High       Volume
  MY PALM OIL           DEC1      3128      -43.00        3102       3130      106
  MY PALM OIL          JAN2        3113      -53.00         3096      3136      1632
  MY PALM OIL          FEB2        3108      -53.00        3092       3133     16556
  CHINA PALM OLEIN MAY2     7792      -212.00     7706       7900     266802
  CHINA SOYOIL        MAY2       8676      -262.00      8618      8846      616770
  CBOT SOY OIL        DEC1      49.33     -1.46           49.14     50.77     41298
  NYMEX CRUDE       JAN2       96.62     +0.45          95.64     96.88     8541
                                                                   
  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 = 3.1795 ringgit)