Malaysian palm oil futures gained 1.8 percent on Wednesday, its largest intraday climb since Sept. 4, supported by rising crude oil prices. Strength in soyabean oil provided additional support to the tropical oil but gains were capped by higher palm oil reserves in Malaysia, the world's second largest producer.
The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange was up 39 ringgit, or 1.8 percent at 2,199 ringgit ($531.54) a tonne, after rising to its highest since Sept. 18 at 2,209 ringgit a tonne earlier in the session.
Trading volumes stood at 44,514 lots of 25 tonnes each.
"Gains in crude oil prices are supporting palm oil because the higher crude oil goes there will be more use of palm oil in making biodiesel," said a Kuala Lumpur-based trader. "Had it not been for the strength in crude oil, palm oil would have dropped below 2,000 ringgit a tonne because the stocks are high."
Oil prices were firm on expectations of a tighter market once US sanctions targeting Iran's petroleum industry kick in next month, although a strong dollar and rising US crude supply curbed gains.
Soyabean oil climbed 0.6 percent to its highest since late June as unseasonal rains slowed the soyabean harvest in parts of the US Midwest.
Another trader said the market was also expecting sustained export momentum.
Exports of Malaysian palm oil products for September rose 51.6 percent versus August, cargo surveyor Intertek Testing Services said last Friday, while independent inspection company AmSpec Agri Malaysia data showed a rise of 49.2 percent.
Palm oil stockpiles are expected to keep a lid on the market however, traders said.
Malaysian palm oil inventories rose to a seven-month high of 2.49 million tonnes in August, official data from a Malaysian industry regulator showed.
Industry analyst Dorab Mistry also pegged Malaysia's peak end-stocks at 3-3.3 million tonnes for the year, while estimating that Indonesia's inventories are currently close to 5 million tonnes and will keep rising.
The Dalian January soyabean oil contract and January palm oil contract were untraded as the Dalian Commodity Exchange was closed for national holidays in China.