Updates with midday prices, adds comment in paragraph 5

By Dewi Kurniawati

JAKARTA, July 5 (Reuters) -Malaysian palm oil futures were set for their best week in five, even as prices fell on Friday as traders chose to book profits ahead of a long holiday weekend.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange FCPOc3 was down 18 ringgit, or 0.44%, to 4,049 ringgit ($860.39) a metric ton by the midday break.

The contract has risen 3.40% so far in the week, heading for its second consecutive weekly gain.

Malaysia's financial markets will be closed on Monday, July 8, for a public holiday. Trading will resume on Tuesday, July 9.

The futures were seen easing on profit-taking after the recent strong recovery and ahead of the long holiday weekend, said Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group.

Dalian's most-active soyoil contract DBYcv1 dropped 0.72%, while its palm oil contract DCPcv1 lost 0.42%. The Chicago Board of Trade BOcv1 was closed for a holiday.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Palm oil inventories in Malaysia, the world's second-biggest producer, rose for a third consecutive month in June as exports slowed, while output fell from the previous month, a Reuters survey showed.

Malaysia's palm oil stocks were seen at 1.83 million tons, up 4.53% from May-end, according to the median estimate of 12 traders, planters and analysts polled by Reuters.

The Malaysian Palm Oil Board is scheduled to release its June data on Wednesday.

Oil prices were little changed but were on track for a fourth straight week of gains and holding near their highest levels since late April on hopes of strong summer fuel demand and some supply concerns.O/R

Higher crude oil futures make palm a more attractive option for biodiesel feedstock.

Palm oil may test support at 4,027 ringgit per metric ton, with a good chance of breaking below this level and falling towards a range of 3,951-3,989 ringgit, according to Reuters' technical analyst Wang Tao.TECH/C

($1 = 4.7060 ringgit)

Reporting by Dewi Kurniawati; Editing by Subhranshu Sahu

For a table on Malaysian physical palm oil prices, including refined oil, Reuters Terminal users can double click on or type OILS/MY01. * To view freight rates from Peninsula Malaysia/Sumatra to China, India, Pakistan and Rotterdam, please key in OILS/ASIA2 and press enter, or double click between the brackets. * Reuters Terminal users can see cash and futures edible oil prices by double clicking on the codes in the brackets: To go to the next page in the same chain, hit F12. To go back, hit F11. Vegetable oils OILS/ASIA1 Malaysian palm oil exports SGSPALM1 CBOT soyoil futures 0#BO: CBOT soybean futures 0#S: Indian solvent SOLVENT01 Dalian Commodity Exchange DC/MENU Dalian soyoil futures 0#DBY: Dalian refined palm oil futures 0#DCP: Zhengzhou rapeseed oil 0#COI: European edible oil prices/trades OILS/E