11/52006 (The Star)  -  NEW DELHI: Palm oil futures in Malaysia may rise as production fails to keep up with demand in Asia and Europe for the vegetable fat used in food, detergents and fuel, according to TransGraph Consulting Pvt. 

Palm oil might climb as high as RM1,600 a tonne by August on the Malaysia Derivatives Exchange, from RM1,448, Ravi Chandra, chief consultant at TransGraph, which advises commodity traders in India, said in a phone interview yesterday. 

Economic expansion in China and India, the world’s biggest buyers of palm and soybean oil, is increasing consumption of fried food as incomes rise. 

Rising demand for gasoline and diesel blended with vegetable oil in Europe amid near-record crude oil prices will bolster gains for palm oil. 

“The European Union will increase purchases of palm oil for human consumption to offset higher usage of rapeseed for production of biodiesel,” Chandra, said from the southern Indian city of Hyderabad. 

China may import 4.75 million tonnes of palm oil in the year ending Sept 30, up 9% from a year ago, according to the US Department of Agriculture. India might buy 3.8 million tonnes in the period, an increase of 2%, it said. India’s cooking oil usage might rise to 12 million tonnes in the year ending October, up 6% from a year ago, Chandra said. 

Global palm oil consumption may climb 6.5% to 35.4 million tonnes in the year ending September, from 33.23 million a year ago, according to the department. 

Higher usage by China and India, the world’s fastest-growing economies, may cut stockpiles by a fifth to 2.6 million tonnes. 

Palm oil in Rotterdam might average US$460 a tonne, up from US$423.79 in 2005, said Ben Santoso, an analyst at PT Namalatu Cakrawala Securities. The commodity may average US$500 in 2007. 

Malaysia’s palm oil stockpiles fell 3.6% to 1.586 million tonnes in March after exports rose, according to the Malaysian Palm Oil Board. 

Near record crude-oil prices are encouraging use of fuels blended with vegetable oils, boosting demand for products from Malaysia and Indonesia, suppliers of 80% of the world’s palm oil. Crude oil reached a record US$75.17 a barrel on April 21. 

Europe plans to replace 2% of its fuel with bio-diesel this year and as much as 5.75% by 2010, according to the European parliament website. – Bloomberg