(Updates prices)
* Weaker soyoil markets narrow spread between palm oil to $175 -trader
* U.S. government shutdown leaves traders in the dark
* Palm oil remains neutral in 2,265-2,332 ringgit range -technicals

KUALA LUMPUR (Oct 2): Malaysian palm oil futures ended lower on Wednesday, tracking weak soy markets, as investors fretted about surging global supply of the competing oilseed that could snatch demand away from the tropical palm.

U.S. soybeans traded near a 19-month low, in the wake of a government agricultural report that showed larger-than-expected existing supplies, as well as improving weather conditions for new crops.

Larger supplies of soybeans for crushing into soyoil, could channel food and fuel demand away from palm oil. The drop in soyoil prices have also narrowed palm oil's discount to the rival vegetable oil, traders said.

"Soybean and soybean oil prices have touched new lows and dragged our market down," said a trader with a foreign commodities brokerage in Malaysia.

"For the past week, the spread between crude palm oil and soy has narrowed to $175 per tonne. All the while, it has been above $200," the trader added.

By Wednesday's close, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had edged down 0.7 percent to 2,312 ringgit ($710) per tonne. Prices traded in a range of 2,303-2,334 ringgit.

Total traded volumes stood at 35,439 lots of 25 tonnes each, right at the average 35,000 lots.

Technicals showed that signals remain neutral for Malaysian palm oil, and will become clearer when the contract gets out of a range of 2,265-2,332 ringgit per tonne, Reuters market analyst Wang Tao said.

The shutdown of the U.S government, which includes the U.S. Department of Agriculture, due to a budget impasse also weighed on agricultural markets, as many traders rely on USDA reports for key information on crop conditions and export sales.

In other markets, Brent crude oil extended losses below $108 a barrel, on signs of improving global supply and expectations that U.S. oil stockpiles are beginning to build.

In competing vegetable oil markets, the U.S. soyoil contract for December edged down 1.02 percent, in late Asian trade.

The Dalian Commodities Exchange is closed for a holiday, and will reopen on Oct 8.

Palm, soy and crude oil prices at 1026 GMT

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 = 3.2345 Malaysian ringgit)