KUALA LUMPUR: Malaysian palm oil futures slipped off seven-week highs on Wednesday ahead of a key industry report that is expected to show stocks rising to a 22-month high last month.
Losses were limited on an expected cut in yield estimates for the US soy crop crushed into competing edible oils and also after Italian Prime Minister Silvio Berlusconi said he would resign, raising hopes his debt-laden country would push through with economic reforms.
Investors are watching weather conditions in Southeast Asia on concerns La Nina rains may further disrupt oil palm harvesting during the end-year monsoon season -- a scenario that could reverse a 20 percent decline in prices this year.
"Before the rise in palm oil price really happens, there is going to be a decline on the high stocks. But moving forward, we are going into a weather market," said a trader with a foreign commodities brokerage in Kuala Lumpur.
"The euro zone problems are going to be there regardless of the Italian prime minister saying he will resign."
By the midday break, the benchmark January palm oil futures on the Bursa Malaysia Derivatives Exchange fell 0.2 percent to 3,040 ringgit ($972)after going as high as 3,068 ringgit -- a level unseen since Sept. 21.
Traded volumes stood at 7,176 lots of 25 tonnes each, compared to the usual 12,500 lots on investor caution over the euro zone debt jitters.
Technical outlook turned negative, with Reuters analyst Wang Tao saying Malaysian palm oil will fall to 2,960 ringgit per tonne as it has completed a wave "e" or wave "a" rise.
Some investors are cutting back positions ahead of the industry regulator Malaysian Palm Oil Board reporting October data on Thursday which is expected to show output staying higher than exports, pushing stocks to abover 2.2 million tonnes, a 22-month high.
Other investors are looking at the US Department of Agriculture's global supply and demand data due later in the day which will show a small decline in soy yields just as concerns of heavy rains delay the US soy harvest.
Brent crude gained for a fifth day on Wednesday, to stand above $115 a barrel, as positive Chinese inflation data soothed fears of a sharp slowdown in the world's second largest oil consumer.
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