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VEGOILS-Palm dips to one-week low; likely drop in output lends support

* Lower margins spur profit-taking, but smaller output

supports - trader

* Palm oil to test support at 2,544 ringgit-technicals

By Anuradha Raghu

KUALA LUMPUR, Nov 6 (Reuters) - Malaysian palm oil futures

fell to a one-week low on Wednesday as investors continued to

take profits after prices surged to one-year highs last week,

but the prospect of a drop in production capped losses.

Benchmark prices had their biggest weekly gain in more than

four years last week, lifted by strong Asian demand and

expectations that Southeast Asian palm oil output has begun to

taper off.

Malaysia and Indonesia, which account for about 90 percent

of the world's palm oil supply, should start to see smaller

yields of the tropical oil as seasonal monsoon rains roll in.

"There's some mild profit-taking at this level since margins

are lower, but the downside could be limited because a lot of

investors are expecting bullish to neutral MPOB numbers," said a

trader with a local commodities brokerage, referring to the

Malaysian Palm Oil Board, the industry regulator.

"November's production could even be lower by 5-8 percent,"

the trader added. A drop in output would eat into stocks, which

stood at 1.78 million tonnes at the end of September.

The MPOB will release data on Malaysia's end-October palm

oil stocks, exports and output on Nov. 11.

At Wednesday's close, the benchmark January contract

on the Bursa Malaysia Derivatives Exchange had dropped

1.3 percent to 2,547 ringgit ($801) per tonne. Earlier it hit

2,545 ringgit, the lowest since Oct. 30.

Total traded volume stood at 36,225 lots of 25 tonnes each,

slightly higher than the average 35,000 lots.

Technicals showed Malaysian palm oil was expected to test

support at 2,544 ringgit per tonne and a break below that would

lead to a further loss to 2,491 ringgit, said Reuters market

analyst Wang Tao.

The weaker Malaysian ringgit also provided some

support on Wednesday as it stokes buying interest from overseas

buyers. The currency had fallen 0.19 percent to 3.1800 against

the U.S. dollar by late trade.

In other markets, Brent oil rose to $106 a barrel, supported

by a fall in U.S. oil product inventories and worries about

prolonged disruption to supply from Libya as the peak winter

heating season looms.

In competing vegetable oil markets, the U.S. soyoil contract

for December rose 0.1 percent in late Asian trade. The

most active May soybean oil contract on the Dalian

Commodities Exchange fell 0.7 percent.

Palm, soy and crude oil prices at 1007 GMT

Contract Month Last Change Low High Volume

MY PALM OIL NOV3 2566 -34.00 2560 2588 159

MY PALM OIL DEC3 2550 -37.00 2550 2582 1076

MY PALM OIL JAN4 2547 -33.00 2545 2585 18847

CHINA PALM OLEIN MAY4 6270 -8.00 6252 6300 566750

CHINA SOYOIL MAY4 7206 -52.00 7202 7252 673480

CBOT SOY OIL DEC3 41.18 +0.03 41.08 41.35 4162

NYMEX CRUDE DEC3 94.10 +0.73 93.65 94.25 14999

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 = 3.18 Malaysian ringgit)

(Editing by Anupama Dwivedi and Alan Raybould)