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VEGOILS-Palm ends at 2-week high on short-covering bounce

(Recasts to reflect price reversal, adds new quote, updates


* Palm rises to 2,330 rgt in late trade on technical buying

* Ringgit strengthens to 3.2310 in late trade

* Palm oil neutral in 2,265-2,327 ringgit range

By Anuradha Raghu

KUALA LUMPUR, Oct 1 (Reuters) - Malaysian palm oil futures

ended higher on Tuesday, posting their third straight session of

gains and reversing morning losses as technical buying supported

prices, although bearish investor sentiment capped gains.

By Tuesday's close, the benchmark December contract

on the Bursa Malaysia Derivatives Exchange had edged up 0.4

percent to 2,330 ringgit ($720) per tonne. Prices reached as

high as 2,332 ringgit, the highest since Sept. 18.

"It's because of technical short-covering," said a trader

with a foreign commodities brokerage. "The palm market was

bearish in the morning because of the big drop in soyoil and

soybean markets. But towards the afternoon prices rose and that

triggered buy-stop orders," the trader added.

Prices fell 1.5 percent in the early session with other

edible oils after a U.S. agricultural report surprised investors

with higher-than-expected supplies of competing oilseeds.

U.S. soybean stockpiles were estimated at 141 million

bushels, the Agriculture Department said on Monday, far larger

than the 124 million expected by analysts and traders. Chicago

soybeans slid to a six-week low.

Larger supplies of soybeans for crushing into soyoil could

snatch demand away from palm oil, a rival vegetable oil.

Sentiment was also hurt by forecasts of a seasonal rise in

palm oil output as trees produce more fruit, although some

traders said stockpiles could stay below the two million tonne

level for now.

Stocks at end-August stood at 1.67 million tonnes, having

fallen nearly 40 percent from record highs in December.

A trader with a local commodities brokerage told Reuters

that market players believed "prices won't fall to 2,200

ringgit, because despite the pickup in production, end-stocks

don't show signs of going above 2 million metric tonnes."

The Malaysian ringgit strengthened further late on

Tuesday, rising 0.88 percent to 3.2310, as the U.S. government

began a partial shutdown that weighed on the dollar. The

stronger local currency capped prices and made the

ringgit-priced feedstock more expensive for overseas buyers.

Total traded volumes stood at 23,244 lots of 25 tonnes each,

below the average 35,000 lots.

On the technical front, Malaysian palm oil looks

neutral in a range of 2,265-2,327 ringgit per tonne and only an

escape will point to a direction, said Reuters market analyst

Wang Tao.

Amid forecasts of rising Southeast Asian palm oil output,

prices may get some respite from the monsoon season that could

hit the region in October.

Indonesia, the world's largest producer, said on Monday its

production may rise only 5 percent to 26.7 million tonnes this

year due to wet weather conditions, below previous estimates of

28 million tonnes.

Wet weather could disturb pollination of fresh fruit

bunches, while heavy rain storms could disrupt harvesting and

complicate logistics.

In other markets, Brent crude eased to $108 a barrel on

Tuesday, near a seven-week low, on worries that a shutdown of

the U.S. government will crimp oil demand, while easing tensions

in U.S.-Iran nuclear talks boosted prospects for rising supply.

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

for December rose 0.1 percent in late Asian trade. The

Dalian Commodities Exchange was closed for a holiday and will

reopen on Tuesday Oct. 8.

Palm, soy and crude oil prices at 1039 GMT

Contract Month Last Change Low High Volume

MY PALM OIL OCT3 2377 +13.00 2338 2377 520

MY PALM OIL NOV3 2331 +13.00 2285 2332 2186

MY PALM OIL DEC3 2330 +9.00 2284 2332 17281

CHINA PALM OLEIN JAN4 5384 -2.00 5370 5418 230740

CHINA SOYOIL JAN4 6960 -52.00 6934 7008 359152

CBOT SOY OIL DEC3 41.13 +0.03 40.98 41.20 5181

NYMEX CRUDE NOV3 102.52 +0.19 101.84 102.58 17165

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=3.233 Malaysian ringgit)

(Editing by Richard Pullin and James Jukwey)