23/02/2013 (Reuters) - Malaysian palm oil futures inched down in light trade on Friday, as lingering investor concern on the tropical oil's sluggish demand weighed on prices.

Seasonally slowing output in Malaysia, the No. 2 producer of the world's most consumed vegetable oil, is expected to help ease stockpiles in February but exports need to pick up faster.

Inventory levels, which have hovered above the 2.5 million tonne mark since October last year, finally edged down in January, but only by 1.9 percent to 2.58 million tonnes, compared with a bigger fall of 2.9 percent expected by traders.

"There is concern soft demand may persist in March, and traders ponder how much upside is left," said a trader with a local commodities brokerage in Malaysia.

"Some consumers remain cautious about buying into the market until they see signs that palm oil demand is improving."

At the close, the benchmark May contract on the Bursa Malaysia Derivatives Exchange eased 0.2 percent to 2,532 ringgit ($817) per tonne, but still posted a weekly gain of 2 percent. Prices traded in a tight range between 2,527 and 2,555 ringgit on Friday.

Total traded volume stood at 18,939 lots of 25 tonnes each, below the typical 25,000 tonnes.

Technicals showed Malaysian palm oil is biased to drop to its Feb. 15 low of 2,476 ringgit per tonne, as it may have completed an uptrend that developed from the Dec. 13, 2012 low of 2,217 ringgit, said Reuters market analyst Wang Tao.

Strong output amid a tepid global economy and dry demand last year weighed on palm oil markets in Malaysia, causing prices to tumble 23 percent and record their biggest loss since the 2008 financial crisis.

But the lower prices have shifted demand towards palm oil that trades at a steep discount of almost $300 per tonne to competing soyoil. Malaysian palm oil is also currently the cheapest vegetable oil in the market after its government revamped export tax structures in the hope of spurring demand.

Brent crude oil rose more than $1 per barrel on Friday, recovering some ground after three days of heavy falls on worries over the state of the world economy.

In other vegetable oil markets, the U.S. soyoil for May delivery crept up 0.5 percent in late Asian trade. The most-active September soybean oil contract on the Dalian Commodity Exchange closed 0.6 percent higher.

  Palm, soy and crude oil prices at 1007 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      MAR3    2479    -2.00    2475    2495     553
  MY PALM OIL      APR3    2506    -7.00    2505    2529    2886
  MY PALM OIL      MAY3    2532    -4.00    2527    2555   11833
  CHINA PALM OLEIN SEP3    7066   +46.00    6992    7104  580722
  CHINA SOYOIL     SEP3    8702   +52.00    8616    8766  665132
  CBOT SOY OIL     MAR3   51.61    +0.30   51.15   51.79    4537
  NYMEX CRUDE      APR3   93.01    +0.17   92.92   93.48   17628

  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=3.102 ringgit)