* Palm rises to highest since Dec. 21

* Gains seen capped as inventory levels still high - trader

* Malaysia could increase palm olein market share - trader (Updates with background,cost of refilling co2 tank quotes)

KUALA LUMPUR, Jan 2 (Reuters) - Malaysian benchmark crude palm oil futures opened firmer on the first day of trading for 2019 on Wednesday, supported by a cut in Indian import taxes, but traders expected gains to be short-lived due to high inventory levels.

India, the world's largest importer of edible oils, said late on Monday it would lower the duty on crude palm oil imports to 40 percent from 44 percent, while a tax on refined oils was cut to 50 percent from 54 percent.

Malaysian shipments of refined palm oil, however, will be taxed at 45 percent compared with 54 percent earlier.

Lower import taxes from India should help support demand and reduce Southeast Asia's palm inventory levels, which have hit record levels in recent months.

Palm oil futures for March delivery climbed to the highest since Dec. 21 in early trade, and were last up 1.5 percent at 2,153 ringgit ($520.05) a tonne.

"India's cut should help, but this won't happen overnight. India is aware of high stocks in Malaysia and Indonesia so they will take their time (buying)," said a Kuala Lumpur based trader, adding that demand is currently still very slow.

"At the same time we are still saddled with high stocks. Reducing it will take time. We know that traditionally January and February are poor export months. It's not going to be that easy."

India raised its import taxes on crude and refined palm oil last March to the highest levels in over a decade in a bid to support local farmers.

Indonesia and Malaysia, the world's top two palm oil producers, have been seeking a reduction to help reduce rising local inventories which have been dragging on prices.

India imports about 70 percent of its edible oil supplies, with Indonesia taking the bulk of India's palm oil market. The new tax structure, however, could favour Malaysia's palm olein as it will face a lower import tax rate than Indonesia's.

"The ratio of Indonesia and Malaysia olein imports by India is about 70:30, so now some of that will move to Malaysia," said another Kuala Lumpur based futures trader.

"The market will go up in euphoria, but it won't last because end-stocks are still high." ($1 = 4.1400 ringgit) (Reporting by Emily Chow; Editing by Christian Schmollinger and Richard Pullin)

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