VEGOILS-Palm slips to over one-week low on technical correction, weak soy

(Updates prices, adds SGS export figures)

* Palm pressured by technical correction, weak external markets -trader

* Malaysia's Sep 1-20 palm oil exports rose 21-26 pct -cargo surveyors

* Palm oil to test support at 2,060 ringgit -technicals

* Tax war between Indonesia and Malaysia may spur palm demand

By Anuradha Raghu

KUALA LUMPUR, Sept 22 (Reuters) - Malaysian palm oil futures stretched

losses into a second session on Monday to hit a more than one-week low, weighed

down by falls in competing markets overseas and further technical correction.

Although palm's demand outlook has brightened, thanks to an export duty cut

on its crude grade, as well as anticipation that output may have already peaked

in August, traders said the rally in benchmark prices had to be reined in.

Market participants said Malaysian palm oil, which last week notched up a

third straight weekly gain, has been overbought after sliding to a

five-and-a-half-year low of 1,914 ringgit per tonne on Sept. 2.

"Right now what we are seeing is some much needed technical correction

coming in, despite the fact that palm fundamentals are improving," said a trader

with a foreign commodities brokerage in Kuala Lumpur.

"After this is done, the market will be supported quite well," the trader

added, but said the support level could range anywhere between 2,050 ringgit and

2,100 ringgit.

The benchmark December contract on the Bursa Malaysia Derivatives

Exchange had inched down 1 percent to 2,089 ringgit ($645) per tonne by the

day's close, with intraday prices brushing 2,064 ringgit, a Sept. 12 low.

Total traded volume stood at 60,023 lots of 25 tonnes each, nearly double

the daily average of 35,000 lots.

Additional pressure from soy, a rival and palm substitute, also added to

losses in palm oil on Monday.

The U.S. soyoil contract for December fell 1.4 percent in late Asian

trade, while the most active January soybean oil contract on the Dalian

Commodities Exchange tumbled 2.9 percent, on fears of record high soy production

in the United States.

Technicals showed that palm oil is expected to test support at 2,060 ringgit

per tonne, a break below which will lead to a further loss to 2,013 ringgit,

said Reuters market analyst Wang Tao.

Demand for Malaysian palm oil recovered strongly in September after laggard

shipments in August, after the No.2 palm grower decided to exempt taxes for

crude palm oil exports for this month and October.

Palm oil exports rose 21.2 percent to 996,065 tonnes between Sept. 1-20

compared with the same period a month earlier, cargo surveyor Intertek Testing

Services said on Saturday, with robust demand seen from major buyers India,

China and Europe.

Another cargo surveyor Societe Generale de Surveillance on Monday showed

that exports for the same period rose 26 percent.

The rise in exports, alongside hopes that the pace in palm oil output may

have cooled after a rise of 22 percent in August, may prevent stockpiles from

bloating.

"Exports are increasing -- there's a lot of crude palm oil coming out of

Malaysia for September," the Kuala Lumpur-based trader added.

"Coupled with the drop in production, stocks may not be as high as initially

expected. Even if stocks do go up in September, it will be a marginal increase."

Meanwhile, palm oil's share of global vegetable oil consumption may also

climb in the months ahead as the top two producers Indonesia and Malaysia engage

in a tit-for-tat export tax tussle designed to boost sales.

While it might seem that Malaysia could lose the competitive advantage

gained from its tax cut if Indonesia also scraps its own duties, traders and

analysts said there's still room for both countries to benefit at the expense of

Argentina's soybean oil and Ukraine's sunflower oil.

In other markets, Brent crude fell below $98 a barrel on Monday, dropping

for the third session in four, as sluggish demand and ample supplies outweighed

expectations of a cut in oil output from the Organization of the Petroleum

Exporting Countries (OPEC).

Palm, soy and crude oil prices at 1012 GMT

Contract Month Last Change Low High Volume

MY PALM OIL OCT4 2123 -13.00 2093 2123 918

MY PALM OIL NOV4 2092 -21.00 2068 2094 12367

MY PALM OIL DEC4 2089 -22.00 2064 2093 28033

CHINA PALM OLEIN JAN5 5076 -148.00 5062 5198 751222

CHINA SOYOIL JAN5 5796 -174.00 5774 5928 704780

CBOT SOY OIL DEC4 32.14 -1.10 32.08 32.58 8100

INDIA PALM OIL SEP4 458.80 -1.10 454.20 459.00 381

INDIA SOYOIL OCT4 593.90 -3.50 590.20 594.20 43295

NYMEX CRUDE OCT4 91.95 -0.46 91.80 92.51 2035

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

India soy oil in Indian rupee per 10 kg

Crude in U.S. dollars per barrel

($1 = 3.24 Malaysian ringgit)

($1 = 6.1404 Chinese yuan)

($1 = 60.81 Indian rupees)

(Editing by Sunil Nair and Prateek Chatterjee)