KUALA LUMPUR, March 4 (Bernama) -- Global demand for biodiesel especiallyfrom the European countries could lead to palm oil prices going aboveRM1,550 per tonne level this year, said chief executive of Malaysian PalmOil Association (MPOA), M.R. Chandran.

"Bio-fuel could increase local consumption. Even before the setting of theBiofuel Act, there are many companies that have shown readiness to set upBio-diesel plants," Chandran said at the Annual Palm and Lauric OilsConference panel discussion.

Panellists at conference put Malaysian palm oil price between RM1,300 toRM1,500 this year.

Chandran said an increase in demand for palm oil by US food manufacturerscould also perk up palm oil market.

"Even if the US turns to South America for its supply of edible oil,Malaysian palm oil could still be a good option for its oil imports," hesaid.

Director of German-based, ISTA Mielke GmbH, Thomas Mielke said rapeseedoil for biodiesel had already gained prominence in Europe due to thesoaring oil prices.

"World crushings of rapeseed and canola are running at a rapid pace and weexpect them to peak in March 2005. The driving force is the demand forbiodiesel in the European Union," Mielke said.

Another contributing factor that may push up palm oil prices is thecurrent dry weather prevalent in Indonesia and Malaysia.

Managing director of Indonesian-based agribusiness and food division, PTSMART TBK, Milton Ng, said that there could be some price volatility thisyear as the expected drought could affect supply and push prices up withinthe next six to 12 months.

"Palm oil production in Sumatera and Kalimantan has been on a declinesince December with production level half of that achieved in the previousyear," Ng said.

Overshadowing the bullish sentiment for palm oil, is the prevailing tarrifin India.

Managing director of research analyst LMC International Ltd, Dr James Fry,said that India's tariffs which favoured soya oil, as opposed to palm oil,could bring prices down.

-- BERNAMA