12/07/2012 (Reuters) - Malaysian crude palm oil futures slipped on Wednesday on weaker export data, although losses were curbed by tight global oilseed supply and expectations that demand will rise in the next few weeks due to Asian festivals.

The declines in palm oil bucked grain futures, which have risen as a drought in the U.S. grain belt hurts crops, and were mainly driven by a decline in Malaysian palm oil exports for the first 10 days of July, pointing to a decline in demand.

"Despite the lower end-stocks yesterday, demand is slipping away," said a trader with a local commodities brokerage in Malaysia. "Empirical evidence suggests end-stocks could recover back up to 2 million tonnes by end September."

Benchmark September palm oil futures on the Bursa Malaysia Derivatives Exchange slipped 1.5 percent to close at 3,082 ringgit ($970) per tonne.

Traded volumes stood at 27,591 lots of 25 tonnes each, slightly higher than the usual 25,000 lots.

Malaysian July 1-10 palm oil exports fell by 13.5 and 22.2 percent respectively, according to cargo surveyors Intertek Testing Services and Societe Generale de Surveillance, taking most traders by surprise. 

The market is also on the lookout for the U.S. Department of Agriculture (USDA) report on grain supplies, due to be released at 1230 GMT, with soybean stocks expected to remain tight following the persistent drought.

But some traders expect demand to pick up by the end of the month, when the Muslim fasting month of Ramadan begins, and then again once top buyers China and India observe major holidays in September through to November.

Palm oil is currently priced lower than other vegetable oils, which also means it is likely to attract buyers.

"Price signals in India are favouring palm oil imports over soybean and sunflower oil. The premium of both sunflower and soybean oil to crude palm oil are at or above recent averages,"Victor Thianpiriya, agricultural analyst with ANZ, said in a research note.

Concerns about El Nino may also boost prices. Japan's weather bureau said on Tuesday there is a strong possibility the weather pattern -- which is often linked to droughts in Southeast Asia and could hurt palm oil output -- will emerge this summer.

"We expect crude palm oil prices to surge if El Nino is confirmed as fresh fruit bunch production may be reduced by a staggering 30 percent depending on the severity of El Nino," Alan Lim Seong Chun, research analyst with Malaysia's Kenanga Investment bank, said in a note.

Brent rose above $98 a barrel on Wednesday, recovering slightly from the previous session's losses, ahead of U.S. inventory data that is expected to show crude stocks shrinking for a third week in the world's largest oil consumer.

In other vegetable oil markets, U.S. soyoil for July delivery lost 0.4 percent. The most active January 2013 soyoil contract on the Dalian Commodity Exchange ended 1 percent lower.

"The Dalian market fell today mostly because traders were cautious ahead of the USDA report tonight. Another reason could be profit-taking from the earlier rally," said Zhang Ru Ming, research manager with Liangyun Futures in Dalian. 

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      JUL2       0    +0.00    3100       0       0
  MY PALM OIL      AUG2    3069   -57.00    3069    3144    1030
  MY PALM OIL      SEP2    3082   -48.00    3080    3161   18974
  CHINA PALM OLEIN JAN3    8134  -124.00    8070    8306  466146
  CHINA SOYOIL     JAN3    9734   -96.00    9686    9880  813214
  CBOT SOY OIL     DEC2   54.79    -0.34   54.69   55.60    7884
  NYMEX CRUDE      AUG2   84.76    +0.85   84.01   85.00   19964

  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=3.1785 Malaysian ringgit)