MALAYSIA will increase production of cooking oil to curb panic buying amid speculation of an imminent price increase caused by soaring commodity costs.

The country's 23 cooking oil refineries have been asked to raise output immediately to meet the public demand, The Star reported on Monday in its online edition.

Deputy Prime Minister Datuk Seri Najib Tun Razak said the shortage in the market was mainly due panic-buying and leakages of supply through smuggling.

'The shortage should not have happened because there is enough supply for consumers and prices of cooking oil in the country is quite low,' he told reporters in Kuala Lumpur on Monday.

He said the authorities would increase enforcement to check smuggling, but added that siphoning of supply through the country's borders, could still happen.

'The price differences between our cooking oil and those in neighbouring countries are much greater now than before, so there is bound to be demand for Malaysian cooking oil from outsiders,' said Datuk Seri Najib.

He said the public should also not be burdened by price increases of cooking oil to counter shortages.

The Domestic Trade and Consumer Affairs Ministry has imposed a 5kg purchase limit of cooking oil for each individual to counter shortages and prevent bulk buying by commercial users.

Prices of essential commodities including wheat, soybeans and palm oil have surged worldwide because of increased demand and higher energy and freight costs. That may have driven some Malaysian cooking oil producers to hoard supplies and hold out for a higher price.

'Cooking oil producers are holding on to stock,' Imran Nurginias Ibrahim, an economist at MIDF Amanah Investment Bank Bhd in Kuala Lumpur, told Bloomberg. 'Palm oil has gone up, so they are saying the cost has already gone up. Cooking oil prices will go up soon.'

Palm oil futures in Malaysia, the global benchmark, rose to a record on Jan 3. Rising incomes are boosting demand for fried food in China and India, the biggest consumers of palm oil. Crude oil prices, which topped US$100 a barrel last week, have increased the appeal of palm oil as an alternative fuel.

Palm oil for March delivery fell as much as RM36 (S$16), or 1 per cent, to RM3,084 a ton on the Malaysia Derivatives Exchange today in Kuala Lumpur. The contract traded at RM3,101 at 2.28pm local time.

From Penang in west Malaysia to Terengganu in the east, states have run short of palm-based cooking oil, the New Straits Times said on Monday. Palm oil exports from Malaysia, the world's second-biggest producer of the commodity, jumped 14 per cent in December, adding to pressure on domestic supplies.

Some Malaysian consumers bought extra supplies of cooking oil after reports of a shortage and an imminent cap on purchases.