VEGOILS-Palm oil touches fresh 5-week high on dry weather fears

* Traders anticipate dry-weather rally to continue

* Market players watching ECB decision later in the day

* Coming up: MPOB stocks data on July 10

(Updates throughout)

By Chew Yee Kiat

SINGAPORE, July 5 (Reuters) - Malaysian crude palm oil
futures rose to the highest in more than five weeks on Thursday,
as investors anticipated a dry-weather rally would continue
after U.S. markets reopened from a holiday.

Futures edged down slightly in the morning session as
traders turned cautious ahead of the European Central Bank's
policy decision due later in the day.

But prices picked up after the midday break as a persistent
drought in the U.S. Midwest that has damaged soybean crops,
leading to a smaller supply of soybean oil, could mean higher
demand for the tropical oil.

"Traders are trying to take positions before the U.S.
markets reopen," said a Singapore-based trader with a foreign
commodities house.

Benchmark September palm oil futures on the Bursa
Malaysia Derivatives Exchange rose 1.4 percent to close at 3,164
ringgit ($1,001) per tonne. Prices earlier touched a high of
3,177 ringgit, a level unseen since May 29.

Traded volumes stood at 34,937 lots of 25 tonnes each, much
higher than the usual 25,000 lots, on increased hedging
activities.

"The market is a little overbought technically and we see
some initial profit-taking. Fundamentally, end-stocks in
Malaysia are tight while weather remains hot and dry in the U.S.
Midwest," said another trader with a local commodities brokerage
in Malaysia.

"Demand is also good with the current discount between palm
olein and soybean oil."

Traders anticipate more vegetable oil demand shifting to
cheaper palm oil on tighter global oilseed supply and buying
ahead of the Muslim fasting month beginning in the third week of
July.

Malaysia's palm oil exports rose in June from a month ago,
according to cargo surveyor data.

Higher exports, together with weaker production growth,
could pile further pressure on Malaysia's stocks, which fell to
a 13-month low in May.

Industry regulator Malaysian Palm Oil Board (MPOB) will
issue official data on stocks and output for June on Tuesday.

Oil prices jumped on Thursday as Norway's state oil major
Statoil said it would start shutting down production at
its North Sea fields after its dispute with the unions over
pensions hit a deadlock.

In other vegetable oils markets, the most active January
2013 soyoil contract on the Dalian commodity exchange
edged up 0.1 percent, after touching a near two-month high on
U.S. weather concerns.

The U.S. market was closed for the Independence Day holiday.

Palm, soy and crude oil prices at 1015 GMT

Contract Month Last Change Low High Volume
MY PALM OIL JUL2 3120 +26.00 3062 3120 59
MY PALM OIL AUG2 3150 +40.00 3089 3158 745
MY PALM OIL SEP2 3164 +42.00 3095 3177 23573
CHINA PALM OLEIN JAN3 8222 +16.00 8166 8262 318602
CHINA SOYOIL JAN3 9778 +34.00 9692 9802 555356
CBOT SOY OIL DEC2 53.88 +0.00 0.00 0.00 0
NYMEX CRUDE AUG2 88.21 +0.55 86.50 88.77 64318

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=3.16 Malaysian ringgit)

(Editing by Chris Gallagher)