KUALA LUMPUR (Dow Jones)--Crude palm oil futures on the Bursa Malaysia
Derivatives may rise to as high as MYR2,700 a metric ton in the next few days,
said a senior industry official in Pakistan, a major palm oil importer.

  Nasir Ibrahim, director of Lahore-based Sadiq Vegetable Ghee Mills, said
Monday a rally that has taken palm oil prices to record highs lately is
justified because supply is still struggling to cope with robust demand.

  Ibrahim said he agrees with a recent forecast from widely-followed palm oil
market analyst Dorab Mistry, who projected that CPO futures would soon hit
MYR2,600-MYR2,700/ton.

  "In fact, in my opinion we will probably see these numbers as early as (this
trading) week," he told Dow Jones Newswires in an interview. "My initial target
is MYR2,650, and if that breaks, then we will see MYR2,700 as well."

  The benchmark August CPO futures contract was last traded at MYR2,583/ton at
0330 GMT.

  The benchmark contract has never reached MYR2,700 in its 28-year history,
traders said.

  The outlook for palm oil prices remains bullish because stocks, which are
already low, may keep falling, Ibrahim said.

  At the end of April, Malaysian palm oil stocks totaled 1.18 million tons.

  That's a level widely considered tight because it's barely sufficient to meet
one month of consumption.


  "Screamingly Low" Stocks


  Official monthly supply and demand data due out June 11 from the Malaysian
Palm Oil Board may confirm consumers' worst fears -- that stocks fell further
at the end of May.

  "The market is showing continuous strength due to good demand (while)
production is not picking up so aggressively yet," Ibrahim said. "Hence, stocks
(may be) reduced to a screamingly low level of below 1.1 million tons."

  In the long-run, the palm oil market is unlikely to sustain its record highs
because surging prices would eventually force consumers to cut back purchases.

  CPO production, which has been poor so far this year because of bad weather,
is also likely to turnaround later in the year, Ibrahim said.

  Malaysian CPO production fell 5% on year in the January-April period.

  In Indonesia, official national figures are unavailable, but plantation
companies such as PT Astra Agro Lestari and PT Smart reported a 10% drop in CPO
output in the first quarter.

  Any reversal in the market's uptrend may not come soon, Ibrahim said, adding
that market participants are still waiting for evidence of a slowdown in
consumption.

  So far, however, demand appears unaffected by high prices, suggesting that
the market may have room to rise even further.

  Pakistan is among a host of major importers of palm oil including China and
India that has continued to buy significant volumes of the commodity despite a
price rally as strong economic growth and rising incomes boost spending.

  In the January-to-April period, Pakistan bought 282,389 tons of palm oil from
Malaysia, up 35% on year, according to MPOB data.

  "We'll still have to wait for the downtrend. For the time being, the path of
least resistance is for a further increase in prices to touch new highs,"
Ibrahim said.