30/01/2013 (Reuters) - Malaysian palm oil futures rose to their highest in nearly 4 weeks on Wednesday, fuelled by expectations that dry weather could hurt crops in top soy producer Argentina and shift demand to the cheaper edible oil.

Dryness in parts of Argentina, the world's No.3 exporter of soybeans, has raised supply concerns and pushed up prices, potentially turning buyers to palm oil, now trading at a discount of more than $300 a tonne.

"The rise of palm oil in the last few days is attributable to external strength. A lot of investors believe that the discount between palm and soy is quite big, and this will stir demand for palm," said a trader with a foreign commodities brokerage in Kuala Lumpur.

"Buyers are always turning to cheaper options if possible. People will jump at this kind of opportunity. The cheapest oil will always prevail."

The benchmark April contract on the Bursa Malaysia Derivatives Exchange rose 1.4 percent to close at 2,510 ringgit ($814) per tonne, just off its intraday high of 2,512 ringgit, a level unseen since Jan. 3.

Total traded volumes stood at 24,129 lots of 25 tonnes each, slightly smaller than the usual 25,000 lots, with traders waiting for cues from January's export data which will be released on Thursday.

Technical analysis shows palm oil is expected to rise to 2,522 ringgit per tonne, as it has cleared a resistance at 2,486 ringgit, said Reuters market analyst Wang Tao.

Leading industry analyst Dorab Mistry said on Wednesday that he expected India, the world's biggest edible oil buyer, to hike import duties on palm oil and soyoil again by the end of March to protect its domestic oilseed farmers.

In January, India raised its duty on crude imports to 2.5 percent from zero and lifted a six year freeze on taxable value of cargoes to curb cheap imports from top palm suppliers Indonesia and Malaysia.

But Malaysia, the world's No.2 producer, will continue to offer the market's cheapest vegetable oil in February as top rival Indonesia will increase its crude palm oil export tax to 9 percent while Malaysia maintains its duties at zero percent.

Brent crude oil fell slightly on Wednesday but held close to a three-month high above $114 a barrel, underpinned by optimism about the U.S. economy after data showed a recovery was gaining ground.

In competing vegetable oil markets, U.S. soyoil for March delivery rose 0.4 percent in late Asian trade. The most active September soybean oil contract on the Dalian Commodity Exchange closed 0.5 percent higher.

  Palm, soy and crude oil prices at 1011 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      FEB3    2450   +48.00    2410    2450     498
  MY PALM OIL      MAR3    2480   +37.00    2442    2480    3787
  MY PALM OIL      APR3    2510   +35.00    2474    2512   14501
  CHINA PALM OLEIN SEP3    7072   +64.00    7000    7080  361290
  CHINA SOYOIL     SEP3    8734   +40.00    8664    8748  435582
  CBOT SOY OIL     MAR3   51.92    +0.21   51.60   52.03    7548
  NYMEX CRUDE      MAR3   97.70    +0.13   97.32   97.75   10042

  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=3.082 ringgit)