* Market sees correction after two-day price rally

* Higher output forecasts dampen market sentiment

14/10/2016 (Reuters) - Malaysian palm oil futures declined at Thursday's close as the market corrected following a two-day rally and higher output forecasts by industry analysts weighed on traders' sentiment.

Benchmark palm oil futures for December on the Bursa Malaysia Derivatives Exchange fell 1.4 percent to 2,616 ringgit ($629.60) a tonne at the close. Traded volume stood at 40,819 lots of 25 tonnes each.

Prices had risen to a two-week high of 2,661 ringgit on Wednesday.

"I see this as a correction because in the past two days, the market has climbed about 100 ringgit. The fundamentals have not changed," a Kuala Lumpur-based trader said.

Another Kuala Lumpur-based trader said the bearish outlook given by the industry analysts at an industry conference in the Malaysian capital had weighed on the market.

"Market has drifted down due to the effects of what the analysts said. Despite the ringgit being so weak, market could not be sustained," he said.

The Malaysian ringgit slid 0.5 percent to 4.2110 to the dollar on Thursday, its lowest in over seven months.

The weakness in the ringgit, palm's traded currency, however continues to support the market as it makes the tropical oil cheaper for holders of foreign currencies.

Earlier on Thursday, leading industry analyst Dorab Mistry said at the Palm Oil Trade Fair and Seminar that palm output in Indonesia and Malaysia will likely rise next year to surpass 2015 production.


James Fry, the chairman of commodities consultancy LMC International said production for the last quarter of 2016 will increase.

Thomas Mielke, editor of Hamburg-based newsletter Oil World, added that global output for the calendar year 2016 was expected to drop 3.3 million tonnes to 59.2 million tonnes.

Mielke lowered a forecast for Malaysia's 2016 output and said the palm futures were expected to hit 2,900 to 3,000 ringgit a tonne in the fourth quarter or in early 2017, citing prices being currently undervalued.

Palm, soy and crude oil prices at 1044 GMT

Contract Month Last Change Low High Volume

MY PALM OIL OCT6 2655 -15.00 2655 2655 21

MY PALM OIL NOV6 2624 -33.00 2612 2661 1055

MY PALM OIL DEC6 2616 -37.00 2606 2659 21884

CHINA PALM OLEIN JAN7 5452 -62.00 5422 5578 1047004

CHINA SOYOIL JAN7 6314 -96.00 6302 6462 815948

CBOT SOY OIL DEC6 33.07 -0.20 32.98 33.62 10712

INDIA PALM OIL OCT6 515.50 -0.20 510.30 516.5 1063

INDIA SOYOIL OCT6 648.9 -3.30 647.9 651.9 6880

NYMEX CRUDE NOV6 50.13 -0.05 49.62 50.25 71849

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
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel

($1 = 4.1550 ringgit)