21/12/2012 (Reuters) - Malaysian palm oil futures edged lower on Thursday as technical selling hurt prices, although losses were curbed by investor optimism that zero export tax early next year will boost shipments of the crude grade and cut stocks.

Malaysia, the world's No.2 producer of the tropical oil, has faced record high stocks since September, putting prices on track for their worst annual performance since 2008.

The low prices, down almost 27 percent so far this year, have enabled the Malaysian government to set the crude palm oil export tax for January at zero percent, which could see Malaysia grab more market share from top producer Indonesia. Traders are even expecting February taxes to remain at zero.

"Today the market is still trying to find a base. Technically, they are trying to set it down below 2,300 ringgit per tonne," said a trader with a foreign commodities brokerage.

"(But) stocks will reduce very fast starting next year because now everybody can ship crude palm oil," he added.

At the close, the benchmark March contract on the Bursa Malaysia Derivatives Exchange inched down 0.4 percent to 2,321 ringgit ($760) per tonne.

Total traded volumes stood at 36,567 lots of 25 tonnes each, much higher the usual 25,000 lots.

Technical analysis showed that a bearish target of 2,217 ringgit per tonne has been established for palm oil, Reuters market analyst Wang Tao said.

Exports in the first twenty days of the month fell a 1.9 percent compared to November, cargo surveyor Intertek Testing Services said on Thursday.

Another cargo surveyor Societe Generale de Surveillance reported a slight 0.5 increase for the same period.

Seasonally slowing production towards the year end could give additional support to Malaysia's palm oil prices in the first quarter of 2013, analysts say.

"The first quarter is always the 'low production' season. With the new tax structure kicking in, it should help stimulate demand," said James Ratnam, an analyst with TA Securities in Kuala Lumpur.

"I expect prices to go up in the first quarter, maybe to about 2,800-2,900 ringgit per tonne. But we have to see whether stocks can come down to a more manageable level."

Brent crude slipped on Thursday to trade around $110 a barrel with investors taking profits after recent gains as talks to avert a U.S. fiscal crisis stalled, stoking worries about demand in the world's biggest oil consumer.

In other competing vegetable oil markets, U.S. soyoil for January delivery fell 0.4 percent in late Asian trade Soybean prices have come under pressure after China scrapped a contract for 300,000 tonnes of U.S. soy recently.

'The most active May 2013 soybean oil contract on the Dalian Commodity Exchange fell 1.5 percent.

  Palm, soy and crude oil prices at 1009 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      JAN3    2200    +9.00    2161    2200     583
  MY PALM OIL      FEB3    2266    -1.00    2236    2268    5067
  MY PALM OIL      MAR3    2321   -10.00    2296    2325   14670
  CHINA PALM OLEIN MAY3    6738   -18.00    6666    6756  607584
  CHINA SOYOIL     MAY3    8584  -134.00    8534    8642  712196
  CBOT SOY OIL     JAN3   48.23    -0.18   48.22   48.75    7868
  NYMEX CRUDE      FEB3   89.63    -0.35   89.42   89.85   12063

  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=3.05 ringgit)