15/05/2012 (Reuters) - Malaysian palm oil futures suffered their sharpest fall in more than a year on Monday, closing at a three-month low as failed talks to form a new Greek government heightened fears about the euro zone's debt crisis. 

Market sentiment was bearish as talks to form a coalition government in Greece stalled, pushing the debt-laden country closer to bankruptcy and a possible exit from the euro zone.

"Political uncertainty in euro zone and a gloomy global economic outlook weighed on the market. Weakness in Malaysian palm overnight is also a factor," said a trader with a local commodities brokerage in Malaysia, referring to palm oil futures that slipped to a 9-week low on Friday. 

Benchmark July palm oil futures on the Bursa Malaysia Derivatives Exchange lost 3.8 percent to close at 3,150 ringgit ($1,023) per tonne, the worst single-day loss since February last year, when prices dropped more than 4 percent. 

Palm oil closed at its weakest since ending at 3,168 ringgit on Feb. 13 this year.

"Some emotional loss-cutting and headline-driven sell down were going on. Fundamentals are actually not so bad ... the sell down was grossly overdone and a rebound is expected soon," said another dealer with a foreign commodities brokerage in Malaysia.

Traded volumes stood at 40,345 lots of 25 tonnes each, much higher than the usual 25,000 lots as traders were eager to cut losses. 

Palm oil seems to be heading towards 3,136 ringgit as it has broken a support level at 3,208 ringgit per tonne, said Reuters market analyst Wang Tao based on technical analysis.

Malaysian palm oil exports for the first 10 days of May fell 6 percent and 14.2 percent from a month ago, according to cargo surveyors Intertek Testing Services and Societe Generale de Surveillance respectively.   

Traders will be looking out for export numbers for the first half of the month due on Tuesday to gauge demand trend for the edible oil. 

Market players expected a recovery in export numbers after the fall in the first 10 days but said that it may not lift palm oil prices by much in a volatile global market. 

Malaysia's April palm oil stock level fell 5.4 percent to 1.85 million tonnes from a month ago, according to industry regulator Malaysian Palm Oil Board.  

Oil fell sharply on Monday, as mounting political uncertainty in Greece and worry about the prospects for growth in China added to a sense that the demand outlook is worsening.

In other vegetable oil markets, the most active U.S. soyoil contract for July slipped 2 percent in late Asian trade while the most active Dalian soyoil September contract  traded 2.6 percent lower. 

"Earlier positive news of lower soybean production from South America has already been priced in, so the Dalian market is now tracking CBOT (U.S. Chicago Board of Trade). If prices continue to fall for the next two days, we will soon see a rebound," said Huang Zhi Qiang, an analyst with Guotai Junan Futures in Shanghai. 

  Palm, soy and crude oil prices at 1009 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      MAY2    3200   -85.00    3184    3240      22
  MY PALM OIL      JUN2    3153  -130.00    3149    3243    2340
  MY PALM OIL      JUL2    3150  -125.00    3145    3242   24693
  CHINA PALM OLEIN SEP2    8286  -240.00    8264    8444  240426
  CHINA SOYOIL     SEP2    9390  -254.00    9354    9556  613196
  CBOT SOY OIL     JUL2   51.18    -1.06   51.14   52.43   17697
  NYMEX CRUDE      JUN2   94.13    -2.00   93.65   95.83   38936

  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 = 3.0785 ringgit)