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SINGAPORE (Dow Jones)--Crude palm oil futures on Bursa Malaysia Derivatives exchange dropped Tuesday due to profit taking following a recent rally.

Regional equity markets and Dalian palm oil also weighed on CPO prices.

The BMD benchmark January contract ended 0.6% lower at MYR3,176 a metric ton after testing a near five-month high of MYR3,209/ton in intraday trade.

The euro zone's sovereign debt issues put some downward pressure on prices due to concerns that newly-elected leaders won't successfully implement aggressive financial reforms, a trading executive in Kuala Lumpur said.

But non-macroeconomic factors are more likely to dominate CPO prices in the coming days. "There's a lot of buying interest in the market," he said.

The medium-term outlook for CPO is bullish as demand-side fundamentals are supportive and supply risks remain due to expected La Nina wet weather conditions, said Ker Chung Yang, a commodities analyst at Phillip Futures Singapore.

He expects CPO prices to consolidate above the MYR3,100/ton level in the coming sessions.

A likely decline in palm oil inventories in the coming months on the back of continued strength in export demand will likely push prices towards the MYR3,300/ton level by January, he said.

In a monthly report, industry regulator Malaysian Palm Oil Board said last week that end-October palm oil stocks fell 1.6% from the previous month to 2.10 million tons.

End-October stocks were lower than market expectations of about 2.25 million tons, Ker said.

Meanwhile, outbound sales of Malaysian palm oil from Nov. 1-15 rose 10.5% from the previous month to 801,463 tons, cargo surveyor Intertek Agri Services said Tuesday.

Another surveyor, SGS (Malaysia) Bhd., put the figure at 802,917 tons, an increase of 11.6% from the previous month, later today.

Investors expect fresh cues from the three-day MPOB International Palm Oil Conference in Kuala Lumpur that ends Thursday; leading oilseeds analyst James Fry and other eminent industry executives are scheduled to speak at the event.

In the cash market, refined palm olein was offered $5 higher at $1,085/ton while cash CPO for prompt shipment was unchanged from Tuesday at MYR3,200/ton.

Open interest on the BMD was 136,716 lots, versus 137,918 lots Monday. One lot is equivalent to 25 tons.

A total of 45,423 lots of CPO were traded versus 15,050 lots Monday.

Closing BMD CPO futures prices in MYR/ton at 1030 GMT: 
 
Month    Close  Previous  Change   High    Low 
Nov'11   3,180     3,170     +10  3,180  3,180 
Dec'11   3,184     3,208     -24  3,218  3,175 
Jan'12   3,176     3,195     -19  3,209  3,163 
Feb'12   3,178     3,194     -16  3,206  3,157
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