22/12/2012  (Reuters) - Malaysian palm oil futures touched a more-than-three-week high on Friday, posting their first weekly gain in five weeks as traders sought to cover short positions amid optimism for a zero export tax on crude palm oil in early 2013 to cut stocks.

Palm oil posted a 5.9 percent gain on the week, its best performance this year, after the edible oil suffered four straight weeks of losses on record high stocks.

"There's a technical break above the resistance level at 2,381 ringgit per tonne, and prices should remain supported above the 2,370 ringgit level," said a dealer with a foreign commodities brokerage in Malaysia. "One factor could be the pre-weekend short cover."   

At the close, the benchmark March contract on the Bursa Malaysia Derivatives Exchange was up 3.8 percent to settle at 2,409 ringgit ($788) per tonne, just off a high at 2,410 ringgit, a level last seen on Nov. 28.

Total traded volumes stood at 33,240 lots of 25 tonnes each, higher than the usual 25,000 lots.

Technical analysis showed palm oil is expected to test resistance at 2,381 ringgit per tonne and a bullish target at 2,419 ringgit has been established, Reuters market analyst Wang Tao said.

 A small surprise increase in Malaysia's palm exports for the first 20 days of the month also injected cheer in the market, with cargo surveyor Societe Generale de Surveillance reporting a slight increase of 0.5 percent in shipments for the period from a month ago.

A jump in crude palm oil exports during the period, which shows companies are pushing out exports ahead of the year-end expiry of  their duty-free quota, could help ease record-high stocks in the No.2 palm producer.

Analysts, however, cautioned against an overly optimistic view on inventory levels, citing lower demand from the northern hemisphere, where the edible oil tends to solidify in winter.

"Hence, despite the expected December month-on-month production decline of 12 percent, inventory should stay persistently high at above 2.5 million tonnes," Alan Lim Seong Chun, an analyst with Malaysia's Kenanga Investment Bank, said in a research note. 

"Looking ahead to first quarter 2013, we expect the inventory to decline only marginally and to stay above 2 million tonnes and limit the price upside to below 3,000 ringgit."   

Brent crude fell below $110 a barrel on Friday after talks in the United States to avert a budget crisis stalled, reviving worries about demand in the world's biggest oil consumer.

Palm oil prices were also supported by gains in competing vegetable oil markets. U.S. soyoil for January delivery  gained 1.8 percent in late Asian trade. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange closed 0.6 percent higher.

  Palm, soy and crude oil prices at 1008 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      JAN3    2284   +83.00    2199    2284     536
  MY PALM OIL      FEB3    2353   +88.00    2271    2354    5274
  MY PALM OIL      MAR3    2409   +88.00    2326    2410   16266
  CHINA PALM OLEIN MAY3    6858  +144.00    6706    6874  868566
  CHINA SOYOIL     MAY3    8630   +50.00    8550    8658  666688
  CBOT SOY OIL     MAR3   49.21    +0.90   48.41   49.28   10191
  NYMEX CRUDE      FEB3   89.11    -1.02   88.93   90.07   20518

  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=3.06 ringgit)