Malaysian palm oil futures rose nearly 2 percent on Tuesday, hitting their highest in nearly three weeks, as production rose more slowly than expected.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed 0.8 percent higher at 2,178 ringgit ($529.15) a tonne, having earlier risen as much as 1.7 percent to 2,197 ringgit, its highest since Dec. 20.
Trading volumes stood at 45,785 lots of 25 tonnes each.
"Production is seeing a lesser increase than expected, some updates also suggest a marginal decline," said a Kuala Lumpur-based futures trader, referring to output data from the Malaysian Palm Oil Association showing that December output rose 1 percent from the previous month.
A Reuters poll forecast Malaysian output to fall 3.6 percent to 1.78 million tonnes in December, while inventories are expected to rise to 3.14 million tonnes, the highest since January 2000.
Another physical trader said that exports were moving out of Malaysia following India's decision to reduce import taxes on Southeast Asian palm oil.
"Malaysia is also offering less supplies for January. People are waiting and hoping prices will further go up," he said.
India is the world's largest edible oil importer, and had previously raised import duties on edible oils last year to support local prices.
In other related oils, the Chicago March soyabean oil contract rose 0.5 percent, while the March soyabean oil contract on the Dalian Commodity Exchange gained 1.8 percent.
Meanwhile, the Dalian January palm oil contract was up 0.8 percent.
Palm oil prices are impacted by changes in soyaoil prices, as they compete for a share in the global vegetable oil market.