20/04/2008 (Reuters), Kuala Lumpur - India, the world's No 2. vegetable oil buyer, has only covered about a third of its palm oil requirements for May, which will spark off a scramble for supplies before prices go any higher, traders said on Monday.

"We have been caught a little flat-footed here because we expected palm oil prices to have corrected by April but it's just been moving from strength to strength," a leading Indian vegetable oils trader told Reuters by telephone from Mumbai.

"There are just 10 days left in April and we are far behind in our coverage for May."

India is expected to import about 450,000 tonnes of palm oil products for May, about 5.8 percent higher from a year ago due to rising consumption, even though the discount to rival soyoil prices was rapidly narrowing, said another Indian vegetable oil buyer.

About 400,000 tonnes would be refined palm olein and the rest crude palm oil sourced mostly from Malaysia and Indonesia, the top palm oil producers in the world. Soyoil is shipped in from Brazil and Argentina.

Over the weekend, the South Asian nation bought 15,000 tonnes of mostly RBD palm olein at $740-$750 per tonne. A mix of soft oil cargoes, including soyoil and sunoil, were locked between $750 and $836 per tonne last week.

"The removal of the import duties for soyoil has helped immensely and with this supply squeeze and strong prices happening for palm oil, Indian interest could shift further into soyoil," said the second trader.

Palm oil prices KPOc3 are up 48 percent so far this year, boosted by strength in energy markets, dwindling stocks and resilient demand, outpacing U.S soyoil which has gained 9.6 percent.

Cargo surveyor Intertek Testing Services and Societe Generale de Surveillance reported an up to a 4.2 percent increase in Malaysian palm oil shipments for April 1-20. [ID:nKLR310924] [ID:nKLR293639]

According to the export data, India was the third-largest buyer after China and the European Union countries, accounting for 80,000-100,000 tonnes.