RTRS:VEGOILS-Palm hits 6-wk low on euro zone debt woes
* Italy borrowing at higher rate, dismal China PMI worsen
sentiment
* Volatile trade drives palm oil futures lower
* Surveyor reports 16.6 pct drop in Malaysia's Dec. 1-15
exports
* Malaysia weather office warns of heavy rains over the
weekend
(Recasts; adds detail, comments)
By Niluksi Koswanage
KUALA LUMPUR/JAKARTA, Dec 15 (Reuters) - Malaysian
crude palm oil futures tumbled to a six-week low on Thursday,
with a global commodities sell-off stretching from the previous
day over concerns the European debt crisis was spiralling out of
control.
The global economic outlook has darkened after Italy was
forced to pay a record borrowing cost on five-year bonds,
reinforcing the view that the European summit last week failed
to provide solutions to the two-year debt crisis.
Adding to the gloom was the shrinking in China's factory
output again in December, strengthening expectations that waning
global demand and tight credit conditions were starting to bite.
The debt crisis and signs of ample edible oil supply will
help drive palm oil to its first yearly decline since the 2008
financial crisis. It has lost 20 percent so far this year.
The decline in palm oil markets was more pronounced, thanks
to a fall in Malaysian exports in the first half of December and
a speculative mini-rally the day before, driven by concerns of
monsoon rains disrupting harvests.
"There was no reason for the market to go up yesterday, so
it is giving back what shouldn't happened in the first place,"
said a trader with a commodities firm in Malaysia.
"The external scenario has always been bad. So any sudden
upward swing (in palm oil) will be an opportunity to sell."
At the close, benchmark February palm oil futures on the
Bursa Malaysia Derivatives Exchange dropped 2.7 percent to 2,972
Malaysian ringgit ($930) after going as low as 2,971 ringgit.
Traded volumes for the February palm contract were at a
three-week high at 16,017 lots of 25 tonnes each, compared with
13,556 lots on Wednesday.
"It is all worry," said a Jakarta-based trader on the euro
zone debt problems. "It should be priced in by now, but funds
think a different way. Crude oil down also contributes."
Cargo surveyor Intertek Testing Services reported a drop of
16.6 percent to 668,385 tonnes in Dec. 1-15 Malaysian palm oil
exports from the same period a month ago as top buyer India
slowed purchases.
Rival cargo surveyor Societe Generale de Surveillance said
exports of Malaysian palm oil products for Dec 1-15 fell 19.2
percent.
But strong demand from China and Europe, as seen in ITS
export data, suggests orders have not quite slowed and the trend
is normalising from more than a two-year high of 1.68 million
tonnes notched in October.
The slowdown in exports may limit the declines in December
end-stocks in Malaysia, the No.2 producer, where traders and
planters expect heavy rains to limit harvesting and cut
production 15 percent.
Malaysia's weather office put out a heavy rain advisory for
the key oil palm growing states of Pahang and Johor, warning
that heavy rains over the coming weekend could cause floods in
low-lying areas. Both states account for 25 percent of national
output.
U.S. soyoil for Jan 2012 delivery rose 0.4
percent in Asian trade with support coming from forecasts of dry
weather from South America that dominates the soy markets next
year.
China's most active Sept 2012 soybean oil contract <0#DBY:>
dropped to a two-week low.
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1=3.1835 Malaysian ringgit)
