28/10/2011 (Reuters) - Malaysian palm oil futures rose to a five-week high on Thursday, as a euro zone debt deal boosted investor sentiment, with higher crude prices and lower output expectations offering additional support.

Benchmark January palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange closed 1 percent higher at 2,980 Malaysian ringgit ($952) a tonne, after having earlier touched 3,007, a high not seen since Sept. 22.

Traded volumes for the January palm contract stood at 13,281 lots of 25 tonnes each, compared with 14,264 lots on Tuesday, before Wednesday's holiday in Malaysia for the Hindu Diwali festival of lights. 

"The monsoon weather (season) is in play, and a supportive external market and higher crude oil," said a Kuala Lumpur-based trader.

Euro zone leaders struck a deal with private banks and insurers on Thursday for them to accept a 50 percent loss on holdings of Greek government bonds as part of a plan to lower Greece's debt burden and try to contain the two-year-old euro zone crisis.

A slowdown in Europe, the second-largest palm consuming region after Asia, could weaken demand, although palm oil could maintain its market share in the region as it is the cheapest edible oil.

"Generally markets are firmer -- from stock markets to commodities," said a Jakarta-based palm trader. "The market has priced in European factors ... with funds trying to go into commodities again (and) Malaysia demand not too bad."

Reuters technical analyst Wang Tao said a bullish target at 3,014 ringgit was intact for palm oil, and a rise above this level would open the way towards 3,133 ringgit.  

Crude oil prices rose more than $2 on Thursday on the European deal.

Also aiding palm oil sentiment on Thursday were lower production expectations due to the rainy season in dominant Southeast Asian producers.

A weaker version of La Nina may reappear this year, but still triggering above-normal rainfall in Southeast Asia and eastern Australia.

"Going into the last quarter of the year, prices have a lot of room to move up," said a Singapore-based analyst. "This is on the back of slowing CPO production growth ... everyone is also looking to the South American (soybean) harvest."

"The euro zone is a driver of positive sentiment in the commodities scene but there will still be a lot of volatility," he said on sovereign debt problems, adding that palm prices could now rise 10 percent by the first quarter of 2012.

At the same time, demand looks robust, with data earlier this week showing Malaysian exports rose around 15 percent for Oct. 1-25.

U.S. soyoil for December delivery gained about 2 percent in Asian trade, while China's most active May 2012

 Palm, soy and crude oil prices at 1013 GMT                                                                                    

  Contract        Month    Last   Change     Low    High  Volume
 

  M'ASIA PALM OIL  NOV1    2980   +30.00    2965    3005     940
 

  M'ASIA PALM OIL  DEC1    2982   +27.00    2961    3009    3601
 

  M'ASIA PALM OIL  JAN2    2980   +29.00    2957    3007   13281
 

  M'ASIA PALM OIL  FEB2    2980   +25.00    2964    3009    3295
 

  
DALIAN
 SOY OIL   MAY2    9406  +146.00    9240    9414  674104
 

  CBOT SOY OIL     DEC1   51.94    +1.05   50.95   52.04   11819
 

  NYMEX CRUDE      DEC1   92.21    +2.01   90.74   92.43   31156

  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil in Chinese yuan per tonne
  Crude in U.S. dollars per barrel
  ($1 = 3.129 ringgit)