KUALA LUMPUR, Nov. 27 (Xinhua) -- Fitch Ratings said Wednesday that it expects Malaysian benchmark Crude Palm Oil (CPO) prices to average 550 U.S. dollars per ton in 2020, up from around 500 U.S. dollars this year.

The rating agency said in a report that it projected CPO prices to be higher next year as it anticipated the demand-supply balance for palm oil to continue to improve.

The report cited the U.S. Department of Agriculture recent forecasts that global consumption would outpace output growth by 2.8 million tons over the marketing years of 2019 and 2020.

It also noted rising use of biodiesel in the world's largest palm oil consumer and producer Indonesia would be a key driver of demand growth. Indonesian government is targeting blending of 9.6 million kiloliters of biodiesel which is made from CPO in diesel fuel sold in the country in 2020.

While imports by the world's second-largest consumer India were likely to increase, it said, any hikes in import duties to support domestic oilseed production could dampen the outlook for demand growth.

The report also highlighted that the average yield for the second largest palm oil producer Malaysia could be weaker in 2020 due to the lower rain fall and carry-over of the impact of fertilizer cuts, resulting in further inventory drawdown.

According to the report, Malaysian palm oil inventories have fallen steadily in 2019 from their peak in December 2018, driven by slowing output growth and healthy demand.

CPO prices have also jumped since October after remaining weak for most of the year due to slowing supply growth and rising biodiesel consumption by Indonesia.

"CPO prices should also receive support from the prices of soybean oil and crude oil, which are seen to stay higher in 2020," said the report.