28/02/2013 (Reuters) - Malaysian palm oil futures inched down on Wednesday to a near six-week low, stretching losses into a sixth straight session with investors remaining cautious that uncertain overseas markets could weigh on demand for the tropical oil.

Prices had crept up 0.7 percent by the midday break as traders retraced from liquidations earlier in the week, but dropped later to as low as 2,395 ringgit per tonne.

Market players are now watching Italy's 6.5 billion euro auction of new 5- and 10-year bonds which kicked off at 1000 GMT for further trading cues.

"There was some retracement in the market earlier but it could not sustain itself because there was no fresh news at those levels, so prices have come under more selling pressure," said a trader with a local commodities brokerage in Malaysia.

The benchmark May contract on the Bursa Malaysia Derivatives Exchange fell 0.4 percent to 2,410 ringgit ($777) per tonne by the day's close. Prices traded in a tight range between 2,395 and 2,443 ringgit.

Total traded volume stood at 34,090 lots of 25 tonnes each, higher than the usual 25,000 lots.

Technicals showed Malaysian palm oil is expected to hover above a support at 2,405 ringgit per tonne for one trading session before breaking this level and falling further towards 2,361 ringgit, said Reuters market analyst Wang Tao.

Palm oil production in Malaysia, the world's No.2 producer, has slowed from its seasonal peak in September. At the same time stronger-then-expected exports of Malaysian palm oil products -- the cheapest in the world -- are widely expected to help ease inventory levels that are still high.

"With a rising export trend and falling production rate, we see a good chance the stockpile levels in February could come down," said Phillip Futures analyst Ker Chung Yang in Singapore. He expects end-stocks in February to fall to 2.2 million tonnes from 2.58 million now.

But the uncertainty in Europe has hampered any sustained rally in palm, as investors fret over political gridlock in Italy which they fear could reignite the euro zone financial crisis and weaken global markets.

"The inconclusive Italy scenario is worrying for the market, not only for palm oil but the commodities and equities markets as well. It's a timely reminder for global investors that the European crisis is not over yet," added Ker.

In other markets, oil traded near $113 a barrel, edging up from a one-month low, as world powers ended two days of talks with Iran over its nuclear work with no sign of a breakthrough.

In competing vegetable oil markets, U.S. soyoil for May delivery rose 0.1 percent in early Asian trade. The most-active September soybean oil contract on the Dalian Commodity Exchange inched down 0.9 percent.

  Palm, soy and crude oil prices at 1028 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      MAR3    2390    +3.00    2370    2400     687
  MY PALM OIL      APR3    2400    -3.00    2387    2430    3241
  MY PALM OIL      MAY3    2410    -9.00    2395    2443   19397
  CHINA PALM OLEIN SEP3    6732   -36.00    6676    6744  458156
  CHINA SOYOIL     SEP3    8324   -58.00    8280    8344  597700
  CBOT SOY OIL     MAY3   49.55    +0.16   49.29   49.67   12159
  NYMEX CRUDE      APR3   92.88    +0.25   92.58   93.08   14275

  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=3.103 ringgit)