KUALA LUMPUR: Malaysian palm oil futures gained on Wednesday on forecast of weak output, but prices lingered near an eight-week low hit in the previous session on worries that renewed lockdowns from the Omicron coronavirus variant may disrupt demand.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange closed up 16 ringgit, or 0.34%, to 4,688 ringgit ($1,111.43) a tonne.

Fundamentals are moving in bullish direction, but the market is reacting to uncertainties arising from the Omicron variant that has led movement of funds out of equities and commodities market, said Mohsin Mohammad, director at Selangor-based cooking oil exporter Sarafiah Natural Resources.

Palm oil giant FGV Holdings told Reuters that migrant workers could start arriving by end-March 2022 in Malaysia to ease a labour shortage and reverse a slump in output by the second quarter.

Palm hits three-week low on Omicron variant fears

However, investors are concerned that lockdowns due to Omicron might further delay the arrival of much-needed migrant workers.

Indian refiners have been reducing palm oil purchases and raising soybean oil and sunflower oil imports after a steep rally in the tropical oil reduced its discount to rivals, industry officials told Reuters.

Supporting prices, the Southern Peninsula Palm Oil Millers' Association (SPPOMA) estimated November production fell 6.8% from the month before, traders said.

Oil prices rose more than 3% as major producers prepared to discuss how to respond to the threat of a hit to fuel demand from the Omicron variant.

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

Dalian's most-active soyoil contract fell 1%, while its palm oil contract eased 0.2%. Soyoil prices on the Chicago Board of Trade were up 1.2%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.