Wed Sep 26, 2012 11:13am IST
* Rising stocks weigh on futures, trading 17 pct lower this year
* Investors closely watching Spain's financing woes
* Palm oil technicals look bearish for next three months
By Chew Yee Kiat
SINGAPORE, Sept 26 (Reuters) - Malaysian palm oil futures dropped on Wednesday, as investors stayed cautious on rising stocks and renewed fears about a slowing global economy on Spain's financing woes.
Palm oil stocks in No.2 producer Malaysia look set to climb higher on strong production, and while exports rose from a month ago, traders said the increase is not enough to bring down high inventory levels, which hit a 10-month high in August.
Malaysian palm oil exports rose 11 percent for the first 25 days of September from a month ago, cargo surveyor data showed on Tuesday.
"The export numbers are a non-factor now -- the first 25 days is not that fantastic. We need bigger exports coming in to reduce stocks," said a trader with a foreign commodities brokerage in Malaysia.
"I believe stocks cannot be reduced in one or two months' time, it will take longer, probably until end of the year to be reduced further, then it will help to suppress the drop in prices."
By the midday break, the benchmark December contract on the Bursa Malaysia Derivatives Exchange lost 1.1 percent to 2,641 ringgit ($857) per tonne.
Futures hit a two-year low on Monday and have lost almost 17 percent so far this year, on track for the worst yearly performance since 2008.
Total traded volumes stood at 9,993 lots of 25 tonnes each, thinner than the usual 12,500 lots as traders were looking for further cues to enter the market.
Technicals showed that over the next three months, palm oil would drop into a support zone of 2,387-2,415 ringgit per tonne, a break below which will open the way towards a range of 1,899-1,952 ringgit, said Reuters analyst Wang Tao.
Cautious sentiment dominates as the markets are closely watching Madrid's ability to control its finances, with ballooning regional debts crippling the government's refinancing efforts.
The country is also subject to a ratings review by Moody's Investors Service. Also weighing on palm oil, Brent crude slipped below $110 per barrel on Wednesday, weighed down by worries that a fragile
global economy would cut oil demand.
In other vegetable oil markets, U.S. soyoil for December delivery lost 0.8 percent in Asian trade.
The most active January 2013 soyoil contract on the Dalian Commodity Exchange also edged down 1.5 percent after touching the lowest level since July 27.
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