20/06/2012 (Reuters) - Malaysian palm oil futures closed higher on Tuesday on expectations of increased demand due to concerns that dry U.S. weather could damage the soybean crop, tightening global edible oil supply.

A victory by pro-bailout parties in the Greek polls over the weekend had sent palm oil futures to close just below the 2,900-ringgit mark on Monday.

But as optimism has faded in broader financial markets, dry weather has come into focus as the U.S. Department of Agriculture (USDA) said unfavourable weather had damaged soybean crop quality.   

"Prices should remain positive with the Greeks behind us. Dry weather in the U.S. Midwest also supports a bullish stance," said a trader with a local commodities brokerage in Malaysia.

Benchmark September palm oil futures on the Bursa Malaysia Derivatives Exchange gained 1.7 percent to close at 2,948 ringgit ($934) per tonne, after rising as high as 2,959 ringgit.

Traded volumes stood at 39,877 lots of 25 tonnes each, much higher than the usual 25,000 lots.

Palm oil technicals were bearish as Reuters market analyst Wang Tao said prices would revisit the June 14 low of 2,838 ringgit.

But fundamentals remain supportive as Malaysian palm oil exports recorded a double-digit jump for the June 1-15 period from a month ago, reflecting resilient demand ahead of the Muslim fasting month starting in mid-July. 

Cargo surveyors will issue exports data for June 1-20 on Wednesday, which traders expect to continue its uptrend from a month ago.  

The USDA revealed dry weather damage on Monday in its weekly crop report, saying 56 percent of soybean crop was in good-to-excellent shape as of Sunday, down four percentage points from the previous week.

A lower soybean crop could lead to a smaller supply of soybean oil, shifting demand to the cheaper refined palm oil, which is trading at a steep discount of around $130.

Brent crude hit a fresh 16-month low on Tuesday on slack demand due to fears about the slowing euro zone economy ahead of Spanish bond sales.

In other vegetable oil markets, U.S. soyoil for July  delivery gained 1.2 percent. The most active Jan 2013 soyoil contract on the Dalian commodity exchange closed 1.4 percent higher.

"The elections in Greece provided some support, but the main reason behind higher prices today was the dry weather in the United States although the impact could be short term," said Huang Zhi Qiang, an analyst with Guotai Junan Futures in Shanghai. 

  Palm, soy and crude oil prices at 1002 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      JUL2    2930   +59.00    2895    2930    1590
  MY PALM OIL      AUG2    2942   +52.00    2905    2946    4467
  MY PALM OIL      SEP2    2948   +49.00    2913    2959   22346
  CHINA PALM OLEIN JAN3    7814   +94.00    7744    7848  327414
  CHINA SOYOIL     JAN3    9318  +112.00    9252    9354  554532
  CBOT SOY OIL     JUL2   49.42    +0.65   48.77   49.61   13540
  NYMEX CRUDE      JUL2   83.10    -0.17   82.28   83.38   10304

  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=3.156 Malaysian ringgit)