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KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange extended gains Friday as traders mostly looked past concerns about euro-zone debt problems to focus on an expected fall in output in the coming months as the seasonal high-production cycle ends.

The benchmark January contract on the Bursa Malaysia Derivatives exchange ended 0.5% higher at MYR3,135 a metric ton after moving in a MYR3,100-MYR3,160 range.

"The market had a soft start today. Profit taking is inevitable after a sharp surge in prices," a commodities trader in Singapore said. "As you can see, declines were limited and people went long as supply will get tight in coming months."

Some trade participants also covered shorts, ahead of a key price outlook by top vegoil analyst Dorab Mistry --widely expected to be price-friendly--over the weekend at an oilseeds conference in Guangzhou.

Easing production growth and lower end-October stocks in Nov. 10 crop report by state-linked Malaysian Palm Oil Board point to further falls in stock levels in the coming months, as the ongoing monsoon and a developing La Nina event could stall harvesting progress.

State-linked Malaysian Palm Oil Board said end-October palm oil stocks fell 1.6% to 2.1 million tons on the back of strong exports to Europe, India and China. Exports rose 19% to 1.84 million tons, above 1.65 million tons and 1.68 million tons forecast by cargo surveyors.

"Palm oil should be entering the seasonal low-yield phase which would normally stretch until March...production may be trimmed further if La Nina brings about excessive rainfall" and lower yields on prolonged wet conditions, Affin Investment Bank said in a report.

In the cash market, refined palm olein was offered at $1,065/ton while cash CPO for prompt shipment was offered at MYR3,150/ton.

Open interest on the BMD was 136,363 lots, versus 134,219 lots Thursday. One lot is equivalent to 25 tons.

A total of 32,747 lots of CPO were traded versus 31,293 lots Thursday.

Closing BMD CPO futures prices in MYR/ton at 1000 GMT: 
 
Month   Close  Previous  Change   High    Low 
Nov'11  3,135     3,120     +15  3,140  3,130 
Dec'11  3,146     3,136     +10  3,160  3,120 
Jan'12  3,135     3,119     +16  3,160  3,100 
Feb'12  3,135     3,123     +12  3,156  3,098
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