2/3/06 HAMBURG (Reuters)  - Wed: A below-average increase in global palm oil production, with strong consumption, is likely to raise prices in the near future, Hamburg-based oilseeds analysts Oil World said on Tuesday.

"Palm oil prices are still attractive, relative to other oils and fats," it said. "They are vulnerable to a further upward correction after a sidewards movement in the last two weeks."

Oil World said it agreed with comments at last week's palm oil industry conference in Kuala Lumpur "which point to a significant appreciation of palm oil prices in the coming months".

It added: "Palm oil prices do not yet fully reflect the pronounced slowdown of the production growth.

"The growth momentum of world demand has become too strong recently and some demand rationing via prices will thus become unavoidable."

Oil World forecasts 2005/06 (October-September) palm oil output at 34.2 million tonnes, up 940,000 tonnes on the season against the previous season's production rise of 3.42 million tonnes. The lower palm output rise will require larger production of other vegetable oils, it said.

"Primarily soyaoil, rapeoil and sunoil will have to fill the gap and have to show substantial increases to compensate for the below-average growth in palm oil production," it said. - Reuters