17/12/2008 (Reuters), Hamburg - Global palm oil prices are likely to rise in coming months and will help strengthen other vegetable oil markets, Hamburg-based oilseeds analyst Oil World said on Tuesday.

"We forecast prices of crude palm oil (cif Rotterdam) will increase to $660 in Jan/June 2009," it said in a weekly report. Cif Rotterdam crude palm oil prices are now around $500 a tonne.

Benchmark Malaysian palm oil prices have reached the bottom of their downward price cycle since late July, it said.

Increasingly tight palm oil supply fundamentals mean palm is showing signs of decoupling from falling crude (mineral) oil prices.

"Crude palm oil futures had already reached their low on Oct 24," it said. "That low was tested during November but was not broken."

It added: "We expect prices of oilseeds and products to appreciate in Jan/June 2009. But the average July/June 2008/09 prices of the major commodities will still be down sharply from last season."

It added that the recovery should be led by palm oil becauses its price discount to soyoil and other vegetable oils is still too large and should narrow in the next few months.

"In our assessment, palm oil stocks have peaked at the end of November in Malaysia and worldwide," Oil World said. "Stocks are set to decline sharply in Dec/March 2008/09."

World demand for palm oil will pick up and more palm oil will be needed to offset the likely decline in soyoil exports and usage in coming months, it said.