Is it possible to read FTP files without writing them using Python?

Well, you have the answer right in front of you: The FTP.retrbinary method accepts as second parameter a reference to a function that is called whenever file content is retrieved from the FTP connection.

Here is a simple example:

#!/usr/bin/env python
from ftplib import FTP

def writeFunc(s):
  print "Read: " + s

ftp = FTP('ftp.kernel.org') 
ftp.login()
ftp.retrbinary('RETR /pub/README_ABOUT_BZ2_FILES', writeFunc)

You should implement writeFunc so that it actually appends the data read to an internal variable, something like this, which uses a callable object:

#!/usr/bin/env python
from ftplib import FTP

class Reader:
  def __init__(self):
    self.data = ""
  def __call__(self,s):
     self.data += s

ftp = FTP('ftp.kernel.org') 
ftp.login()
r = Reader()
ftp.retrbinary('RETR /pub/README_ABOUT_BZ2_FILES', r)

print r.data

Update: I realized that there is a module in the Python standard library that is meant for this kind of things, BytesIO:

#!/usr/bin/env python
from ftplib import FTP
from io import BytesIO

ftp = FTP('ftp.kernel.org') 
ftp.login()
r = BytesIO()
ftp.retrbinary('RETR /pub/README_ABOUT_BZ2_FILES', r.write)

print r.getvalue()