05/10/2012 (Reuters) - Malaysian palm oil futures ended flat on Thursday, as traders awaited a government decision on a proposal to cut export tax on the crude shipments that could help spur exports at a time when stocks are rising at a faster pace.

The commodities minister in the world's No.2 producer of the edible oil said he will propose to cut crude palm oil export taxes to 8-10 percent from a current 23 percent in a bid to counter competition from top producer Indonesia.

Malaysia's cabinet is likely to decide on the proposal on Friday.

Indonesia has taken up a greater market share of refined palm oil products after it adjusted its export tax regime to derive greater margins for processors, which helped to slow Malaysia's own shipments as production grew.

This has led to a stock build up with palm oil futures losing more than a quarter of its gains since the start of this year.

Palm oil futures have also come under pressure from the festering euro zone debt crisis that has clouded the outlook for economic and commodity demand growth.

"The biggest question is whether this proposal will be accepted and if so, when will it come into effect?" said a trader with a foreign commodities firm in the Malaysian capital.

At the close, the benchmark December contract on the Bursa Malaysia Derivatives Exchange edged up one ringgit at 2,352 ringgit ($770) a tonne after going as high as 2,404 ringgit in choppy trade.

Total traded volumes stood at 33,333 lots of 25 tonnes each, higher than the usual 25,000 lots as some traders took up positions ahead of the  decision expected on Friday.

Technicals showed that prices remain in a bearish target range of 2,127-2,181 ringgit and gains from the current level could be limited to 2,422 ringgit, said Reuters market analyst Wang Tao.

Palm oil tumbled to its lowest in nearly three years on Tuesday on the back of lacklustre shipments and growing stocks, raising concerns of contract defaults or delays from top buyer India.

Any contract defaults could slow the export pace and push Malaysia's September palm oil stocks above a ten month high of 2.1 million tonnes seen in August.

In a bullish sign for palm oil, Brent crude oil rose towards $109 per barrel on Thursday as expectations Spain would seek a bailout and better U.S. data encouraged investors back into riskier assets such as oil and commodities.

U.S. soyoil for December delivery gained 0.4 percent in late Asian trade. The Dalian Commodity Exchange is closed for a week-long holiday in China and will resume trading on Oct. 8.

  Palm, soy and crude oil prices at 1007 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      OCT2    2189    +6.00    2189    2205      19
  MY PALM OIL      NOV2    2275    +6.00    2234    2307    1291
  MY PALM OIL      DEC2    2352    +1.00    2321    2404   19851
  CHINA PALM OLEIN JAN3    7186   +10.00    7172    7244  220106
  CHINA SOYOIL     JAN3    9278    +6.00    9250    9328  305268
  CBOT SOY OIL     DEC2   50.92    +0.19   50.61   51.03    6778
  NYMEX CRUDE      NOV2   88.77    +0.64   87.91   88.80   24093

  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 = 3.054 ringgit)