20/02/2014 (Reuters) - Malaysian palm oil futures rose on Wednesday, stretching gains into a sixth day, as stronger export demand and concerns of dry weather curbing output buoyed prices to their highest level since September 2012.

Market participants said the dry weather in Malaysia and Indonesia, where most of the world's oil palm is grown, could
hinder production and tighten supplies of the edible oil which is used to make soaps to cookies and biofuel.

"The hot spell has a negative impact on production. Crops are very low -- there's an overall 12 percent reduction in February output so far," said a trader with a local commodities brokerage in Malaysia.

"Indonesia is also facing the same problem," the trader said. "There will be a drawdown in end-stocks." 

By the midday break, the benchmark May contract on the Bursa Malaysia Derivatives Exchange had edged up 0.3 percent
to 2,721 ringgit ($825) per tonne. Prices had earlier touched 2,734 ringgit, their highest since Sept. 21, 2012.

Total traded volume stood at 16,782 lots of 25 tonnes, above the usual 12,500 lots.

A surge in exports in the first half of February also lifted hopes of a recovery in demand from top consuming countries. Cargo surveyors reported Malaysian shipments between Feb. 1-15 rose 27-32 percent from a month earlier, due to bigger demand from China, Europe and Pakistan.

"All these positive factors are expected to be supportive to crude palm oil prices and we reiterate our view that prices should continue to appreciate up to 2,900 ringgit per metric tonne by end-March 2014, as we expect a sustained inventory downtrend throughout Q1, 2014," said Kenanga Investment Bank analyst Alan Lim in a note on Wednesday.

"We have revised down our February inventory forecast by 4 percent to 1.80 million tonnes from 1.88 million tonnes previously," Lim added. End-stocks in Malaysia currently stand at 1.93 million tonnes. 

But technicals were bearish. Malaysian palm oil faces a resistance at 2,738 ringgit per tonne and may retrace to 2,712
ringgit, said Reuters market analyst Wang Tao.

Cargo surveyors will release data for Feb. 1-20 exports on Thursday. 

In vegetable oil markets tracked by palm, the U.S. soyoil contract for May fell 0.2 percent in early Asian trade,
while the most active May soybean oil contract on the Dalian Commodities Exchange rose 1.1 percent.   

In other markets, Brent crude held above $110 a barrel, underpinned by geopolitical concerns in Africa and Venezuela,
while U.S. oil touched its highest in four months as stockpiles are forecast to fall on winter demand and new pipeline capacity.

  Palm, soy and crude oil prices at 0521 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      MAR4    2715    +5.00    2713    2728     252
  MY PALM OIL      APR4    2725    +7.00    2721    2736    3242
  MY PALM OIL      MAY4    2721    +7.00    2717    2734    8922
  CHINA PALM OLEIN MAY4    6126   +90.00    6102    6168  325522
  CHINA SOYOIL     MAY4    6812   +74.00    6798    6860  251558
  CBOT SOY OIL     MAR4   40.31    -0.05   40.23   40.39    2010
  NYMEX CRUDE      MAR4  102.83    +0.40  102.65  103.14    3643

  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 = 3.30 Malaysian ringgit)