The benchmark November palm oil on the Bursa Malaysia Derivatives Exchange traded up 0.7 percent at 3,072 Malaysian ringgit ($1,023) per tonne. Prices earlier hit a high at 3,076.

Exchange volumes for the November contract were thin at 2,042 lots of 25 tonnes each versus 7,895 lots on Friday.

"The market today is pretty firm," said a Kula Lumpur-based trader. "Everyone expected the market to be down but it's going up.

"There is a huge premium on soyoil over Malaysian palm oil," he added. "Even today, crude oil drops and soybean oil doesn't drop -- palm is more or less tracking soybeans."

The US Department of Agriculture's supply-demand report, due on Monday at 1230 GMT, will update the agency's crop forecasts in the light of hot and dry weather hurting US soy yields that could lift soyoil's premium to palm oil.

Soybeans rose for a second straight session ahead of the report that is likely to forecast tightening global stocks after harsh August weather.

"It should be positive for palm oil because everyone knows the yield for soybean is coming down -- it should be friendly," said the trader.

Among other vegetable oil markets, US November soy rose, while the most active May 2012 soy oil on China's Dalian Commodity Exchange also climbed.

Capping gains however, oil fell by more than $1 on Monday as the dollar strengthened and investors shunned commodity risk because of Europe's deepening sovereign debt crisis, while economic gloom dampened the outlook for energy use.

Also hitting sentiment, the Nikkei skidded more than 2 percent to a fresh 2-1/2 year closing low on concerns Europe's sovereign debt woes and US stock losses will deepen.

Soybean futures have been largely insulated from the economic crisis as hot weather in the United States, the world's top exporter of grains and oilseeds, is expected to further tighten world supplies.

"MPOB came out on the friendly side," said a Singapore-based trader. "Everybody is taking some protection against the (USDA) report.

"After the USDA report, I expect down downward pressure, what with the weaker macro economic side," he added. "Today volumes are very low."

Also on the data front, Malaysia's August palm oil stocks fell 5.6 percent to 1,884,560 tonnes from a revised 1,996,396 tonnes in July, industry regulator Malaysian Palm Oil Board said.