Kuala Lumpur, May 31 (Dow Jones) - The current rebound in the palm oilmarket isn't surprising, as prices had fallen too much in recent weeks, asenior Indonesian industry official said Monday, adding that crude palmoil prices are expected to recover to at least 1,650 ringgit ($1=MYR3.8) ametric ton.CPO futures on the Bursa Malaysia Derivatives fell as much as 25% inthe past month, with the benchmark August contract hitting a neareight-month low of MYR1,435/ton Friday.The contract has since recouped some of its losses to end atMYR1,610/ton Monday amid active short covering.Derom Bangun, chairman of the Indonesian Palm Oil ProducersAssociation, or GAPKI, said in an interview with Dow Jones Newswires thatlower demand from India this year, concerns about potential contractdefaults or cancellations by China and rising global palm oil productionhave damped sentiment in the palm oil market.However, he said the recent heavy selling pressure appears overdone."Traders may have overreacted, causing prices to come down too muchbecause technically speaking, the market couldn't go down that badly,"Bangun said.Bangun expects palm oil prices to remain volatile for another two tothree weeks before stabilizing.Although buying interest has been slow in recent weeks, it was only amatter of time before buyers returned to the market, he said, adding thatrefiners and consumers would need to replenish supplies soon."In Indonesia, there are some (producers) who have the ability toabsorb this condition (of lower prices) because they have good cash flow.They may be reluctant to sell at these low levels," he said.Bangun said he expects CPO prices to rise back to levels of "not lessthan MYR1,650".Indonesian palm oil prices typically track the movement of theMalaysian market.Crude palm oil production in Indonesia, the world's second largestproducer, is expected to rise to 10.4 million tons in 2004 because ofimproved yields, Bangun said.In 2003, production was estimated at 9.9 million tons.Exports are expected to rise in tandem to 7 million tons this year,from 6.5 million tons in 2003, he said.Meanwhile, Bangun said there was also talk in Indonesia of potentialcontract defaults by Chinese importers."But I don't know exactly who is suffering from it or what exactly isthe quantity involved," he said.Rumors surfaced last week that palm oil importers in China, theworld's largest palm oil consumer, may default on earlier contracts to buypalm oil products at high prices.The steep drop in edible oil prices coupled with the Chinesegovernment's credit-tightening program have triggered fears that Chineseimporters may reject delivery of some hundreds of thousands of tons ofpalm oil.Traders said, however, Chinese importers have sought to re-negotiateprices for the purchases, raising hopes that defaults could yet beavoided.