04/08/2012 (Reuters) - Malaysian crude palm oil inched lower on Friday, posting a fourth straight weekly loss as investors remained cautious after the European Central Bank failed to come up with an immediate measure to tackle the euro zone's fiscal crisis.

The central bank indicated on Thursday that it may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs but the conditions it set and the dissenting voice of its key German member disappointed markets.

The market is also anticipating higher palm oil stocks in July for No.2 producer Malaysia due to weaker exports and higher production output, and that is weighing on futures prices.

"Right now, you have weather on one hand, and macroeconomic fears on the other," said a trader with a foreign commodities brokerage in Malaysia, referring to the persistent U.S. drought weather that had squeezed global oilseed supplies.

"It also looks like stocks are going to break above the 2-million-tonne mark."

The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange ended 1 percent lower at 2,918 ringgit ($934) per tonne.

Prices have lost 0.3 percent for the week after posting losses for three consecutive weeks.

Traded volumes stood at 13,937 lots of 25 tonnes each, much lower than the usual 25,000 lots.

Technicals are bearish as palm oil's target at 2,880 ringgit remains intact, Reuters market analyst Wang Tao said.

Weather concerns remain after the U.S. Department of Agriculture downgraded soybean crop condition at good-to-excellent by 2 percentage points earlier this week.

A drop in soybean oil supply could shift more vegetable oil demand to the cheaper palm oil, which is trading at a hefty discount of above $200 a tonne.

Traders are also looking out for weather concerns closer to Southeast Asia, as the El Nino's dry weather pattern may return by end of the year and could hurt production for top palm oil producers Indonesia and Malaysia.

Malaysian palm oil exports fell in July from a month ago, reflecting slowing demand from top food buyers China and India, according to cargo surveyors Intertek Testing Services and Societe Generale de Surveillance.

Market players expect slowing exports to lead to higher stocks for July as industry regulator Malaysian Palm Oil Board releases official data on July 10.

Brent crude oil reached $107 a barrel on Friday, as investors awaited key U.S. jobs data that could bolster hopes that the Federal Reserve may do more to stimulate the economy.

In other vegetable oil markets, the most active U.S. soyoil contract for December delivery had gained 0.3 percent by 1005 GMT. The most active January 2013 soyoil contract  on the Dalian Commodity Exchange closed 0.1 percent higher. 

  Palm and soy oil prices at 1005 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      AUG2    2910    +0.00    2905    2916      23
  MY PALM OIL      SEP2    2907   -13.00    2907    2936     578
  MY PALM OIL      OCT2    2918   -28.00    2913    2950   11349
  CHINA PALM OLEIN JAN3    7750    +6.00    7698    7780  194452
  CHINA SOYOIL     JAN3    9490   +12.00    9432    9516  369254
  CBOT SOY OIL     DEC2   52.49    +0.13   52.22   52.88    5870

  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
  ($1=3.13 Malaysian ringgit)