KUALA LUMPUR, Aug 21 (Bernama) -- Strong demand and reduced stock levelwill enable palm oil prices to remain in the positive direction for thenext few months.

Wilmar Trading Pte Ltd trading director Nico Hans said that from thedemand side, palm oil prices would depend greatly on the consumptionpattern in the three major markets namely India, China and Pakistan.

In his working paper entitled "Pricing Aspect of Palm Oil Trade" presentedat the 2001 International Palm Oil Congress (2001 PIPOC) here today, hesaid these major markets preferred palm oil over soft oil due tologistical convenience and quick delivery.

"In times of tightness, palm oil can therefore be traded at a premium oversoya oil," he said at the three-day congress organised by the MalaysianPalm Oil Board (MPOB). The congress ends tomorrow.

Hans said that palm oil was widely preferred in India and Pakistan as itwas suitable for ghee, while in China palm oil was used for fryingpurposes, like noodles.

"The demand for palm oil is further more very elastic in all thesecountries.

"Consumers only have a certain amount of money available in their weeklybasis. The lower the prices the higher the consumption and vice versa," hesaid.

Hans also noted that palm oil production is not likely to expand aswitnessed during the last two years.

"Lesser new acreage has been developed during the last three years asloans became scarcer, while prices went into bear trend," he said.

Furthermore, political unrest in Indonesia had also prevented freshinvestments into the industry, he said.

Another factor is that due to slower marketing of mainly the Malaysianpalm oil, stocks had been pushed too high and caused logistical problemsthat took the palm oil lower than where it should have been.

On the sustainability of the firm palm oil prices in the country, Hanssaid that it was difficult to predict as he did not have a preciseinformation on the local future production.

He said that comfortable level of palm oil prices in Malaysia would bebetween RM1,100 and RM1,130.

-- BERNAMA