08/12/2012 (Reuters) - Malaysian palm oil futures closed flat on Friday, but notched their biggest weekly loss in almost a month amid an uncertain outlook where record high stocks are weighing on prices at the same time as expectations are rising for a pick up in demand.

Palm oil futures have fallen almost 28 percent so far this year on record stocks and concerns that the euro zone debt crisis would reining in global growth.

"Palm oil is stuck," said a trader with a commodities brokerage in Kuala Lumpur. "It is undervalued as biodiesel demand has kicked in because of the high margins, but it also cannot go higher because of high stocks."

The benchmark February contract on the Bursa Malaysia Derivatives Exchange settled up 0.04 percent to 2,296 ringgit ($750) per tonne in see-saw trade. The contract  recorded a decline of about 3 percent for the week, its third straight weekly loss and the steepest fall since Nov. 11.

Total traded volumes stood at 34,886 lots of 25 tonnes each, compared to the usual 25,000 lots.

Malaysian palm oil stocks probably hit a record 2.58 million tonnes in November, a Reuters survey showed ahead of official data on Monday, helping the tropical oil widen its discount to competing Argentine soyoil to $360 per tonne.

The discount remains unsustainable and will narrow as more demand shifts to palm oil in the next few months, especially with wet weather delaying soy plantings and curbing yields in the world's biggest soyoil exporter Argentina.

Traders are watching for cargo surveyor data on Malaysia's Dec. 1-10 palm oil exports on Monday to confirm strong demand as No.2 edible oil buyer China stocks up before stricter quality controls on the refined grades come into effect on Jan. 1.

In addition, export data may be even stronger as Malaysian planters scramble to exhaust an annual tax-free export quota totalling 3.5 million tonnes that is set to expire at the end of December.

Malaysia's Commodities Ministry will hold a briefing for refiners on Monday to get feedback on the government's plan to cut crude palm oil export taxes and completely dismantle the tax free export quota for the grade, traders said.

Some planters are asking for the quota to continue until stocks fall below 2 million tonnes.

Brent crude steadied above $107 per barrel on Friday, but prices were headed for their biggest weekly loss in more than a month on worries about the euro zone economy and a looming fiscal crisis in the U.S., the world's top oil consumer.

Despite the decline in oil markets, Singapore gas oil GO-SIN sells at about $931 per tonne -- a 37 percent premium to Indonesian crude palm oil used in biofuel.

In palm oil's competing markets, U.S. soyoil for December delivery edged up 0.2 percent in Asian trade. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange ended almost flat.

  Palm, soy and crude oil prices at 1003 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      DEC2    2118    +3.00    2110    2118       7
  MY PALM OIL      JAN3    2212    -3.00    2208    2250    1849
  MY PALM OIL      FEB3    2296    +1.00    2283    2342   17730
  CHINA PALM OLEIN MAY3    6838    -6.00    6784    6850  430682
  CHINA SOYOIL     MAY3    8774    +4.00    8708    8774  372106
  CBOT SOY OIL     JAN3   51.16    -0.04   51.04   51.38    4781
  NYMEX CRUDE      JAN3   86.15    -0.11   86.09   86.65   13192

  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 = 3.0470 ringgit)