23/11/2011 (Reuters) - Malaysian palm oil futures fell their lowest in more than a week on concerns huge debt burdens in the U.S. and Europe may prove to be unmanageable and stall growth and commodity demand. 

Gloomy economic sentiment pushed palm oil futures lower for a second day although a technical correction helped claw back some losses on the back of favourable demand and supply fundamentals. 

"I doubt that the market could go much lower from 3,100 ringgit as the fundamentals - heavy rains and weather - can support this level," a Malaysian trader said, in reference to monsoon season that is getting aggravated by La Nina-driven rains.     

Benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange closed 0.5 percent lower at 3,175 Malaysian ringgit ($997) per tonne after going as low as 3,145 ringgit, a level last seen on Nov 11. 
   
Overall traded volumes stood at 28,874 lots of 25 tonnes each, higher than the usual 25,000 lots.
   
Reuters analyst Wang Tao stuck to a bearish view, saying a target of 3,134 ringgit per tonne remains in place as seen by a wave pattern and a Fibonacci retracement analysis.
  
Indonesian Palm Oil Association was more optimistic, saying Palm oil prices will range between 3,000 and 3,400 Malaysian ringgit per tonne in the next three months, as wet weather in Southeast Asia curbs output.  
    
In Malaysia, fundamentals are turning more bullish with media reports of heavy rains triggering some floods in a key producing state of Johor which accounts for about a quarter of national output. 
   
Heavy rains tend to reduce harvesting rounds in oil palm estates and floods will complicate the transport of the edible oil to mills and refineries. 
   
"There have not been any delays in palm oil deliveries in the current scenario but yield quality is getting affected with the exposure to excess moisture," said a planter in Johor state. 
   
The market is bracing for low production in the last quarter due to a seasonal decline in yields and the prospects of a brewing La Nina weather condition making the seasonal monsoon rains worse. 
   
That could prompt a rush for cargoes as buyers in China, India and Pakistan want to restock after major festivals and public holidays. Export data showed firm growth.  
   
In related markets, Brent crude futures rose above $107 a barrel on Tuesday as fresh sanctions on Iran raised the prospect of political instability in the region, offsetting persistent worries about the health of Western economies and their fuel demand.  
    
But the gloomy economic outlook weighed on some vegetable oil markets. U.S. soyoil for December delivery edged up 0.3 percent on fresh buying but China's most active May 2012 soybean oil contract <0#DBY:> dropped 1.5 percent. 
   
"Fundamentally there are still no optimistic factors in the market mostly because of the euro zone crisis," said Zhang Ru Ming, research manager with Liangyun Futures. 
 
Palm, soy and crude oil prices at 1009 GMT
                                                                        
  Contract                         Month     Last       Change      Low       High     Volume
  MY PALM OIL                 DEC1    3168      -32.00         3155     3214      705
  MY PALM OIL                 JAN2     3180      -15.00         3150     3212      3468
  MY PALM OIL                 FEB2     3175      -16.00         3145     3214     19041
  CHINA PALM OLEIN    MAY2     8022       -148.00      7996     8134     235666
  CHINA SOYOIL             MAY2     8966       -134.00      8956     9060     349240
  CBOT SOY OIL             DEC1     50.06     +0.17          49.63    50.26    5274
  NYMEX CRUDE           JAN2      97.62      +0.70          96.55    97.96   17109
                                                                        
  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 = 3.1845 ringgit)