* Prices rise 2.5 percent, buoyed by technical correction

* Gains limited by rising edible oil supplies, weak demand

KUALA LUMPUR, March 18 (Reuters) - Malaysian palm oil

futures rallied from a near seven-week low on Wednesday in a

technical correction to end higher, though traders said weaker

crude oil and soy prices would cap gains.

The benchmark June contract on the Bursa Malaysia

Derivatives Exchange rallied in late trade to close 2.5 percent

higher at 2,193 ringgit ($592) a tonne, after dipping to 2,128.

Market players said the correction was timely as prices have

dropped 11 percent from a 2,400 ringgit peak in early March, but

warned that palm's bearish trend will still prevail.

"We are in the midst of a technical-inspired correction,

before fundamentals cap the rise," said a trader with a local

commodities brokerage in Malaysia. "Only modest rallies are

anticipated. The huge world supplies in 2015 will weigh on

prices as local production picks up."

Weaker prices of crude and soy oil have also raised concerns

palm might lose more market share, both as a fuel and for food.

Total traded volume stood at 59,533 lots of 25 tonnes on

Wednesday, much higher than the usual 35,000 lots.

A weaker Malaysian ringgit, which usually spurs

buying interest in the ringgit-priced palm feedstock, has given

little relief to the downward pressure, traders say. The ringgit

was trading at 3.7060 per U.S. dollar late on Wednesday.

"What's supportive is just the ringgit, but I would think

that is not really a strong support as the external factors are

pressuring prices more," said Ryan Chua, a broker with Oriental

Pacific Futures in Kuala Lumpur.

Indonesian palm oil exports dropped to a five-month low of

1.79 million tonnes in February, industry data body showed.

However, overseas sales from the No. 1 producer are expected to

pick up soon as China replenishes its depleting stockpiles of

the tropical oil, traders and analysts said.

Indonesia crude palm oil output in February likely steadied

near January levels, a survey of leading industry officials

showed on Wednesday, although production is seen picking up in

the coming months as the monsoons recede.

Brent prices fell on Wednesday on oversupply concerns as

data showed U.S. crude stocks had hit a record high.

In competing vegetable oil markets, the most active

September soybean oil contract on the Dalian Commodity

Exchange fell 0.5 percent in late Asian trade, while the U.S.

soyoil contract for May rose 1 percent.

Palm, soy and crude oil prices at 1058 GMT

Contract Month Last Change Low High Volume

MY PALM OIL APR5 2197 +46.00 2143 2197 1065

MY PALM OIL MAY5 2199 +53.00 2135 2203 11908

MY PALM OIL JUN5 2193 +53.00 2128 2194 30471

CHINA PALM OLEIN SEP5 4616 -50.00 4578 4626 637820

CHINA SOYOIL SEP5 5362 -24.00 5338 5380 477086

CBOT SOY OIL MAY5 30.32 +3.60 29.93 30.38 5773

INDIA PALM OIL MAR5 443.00 +3.60 436.80 445.90 1106

INDIA SOYOIL APR5 580.15 +3.20 571.80 581.30 41805

NYMEX CRUDE APR5 42.24 -1.22 42.05 42.91 26680

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 = 3.7060 Malaysian ringgit)

($1 = 6.2294 Chinese yuan)

($1 = 62.71 Indian rupee)