Malaysian palm oil futures rose over 1.5% on Wednesday after the government said it will import more products from top palm buyer India in a bid to mend relations following a row over Kashmir.
The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange closed 1.8% higher at 2,253 ringgit ($537.26) a tonne.
The vegetable oil contract took a hit this week after Indian refiners halted purchases of Malaysian palm oil for shipment in November and December, fearing New Delhi could raise import taxes or enforce other measures to curtail imports.
The move followed a Reuters report that India was considering restricting imports of some products from Malaysia, including palm oil, after the Southeast Asian country's leader criticised New Delhi for its actions in Kashmir.
On Tuesday, Malaysia's minister in charge of the palm oil portfolio said the country will look to increase imports of crude sugar and buffalo meat from India "in light of India's importance as our third-largest export destination".
Prime Minister Mahathir Mohamad said on Wednesday Malaysia will work diplomatically with India if it decides to restrict imports of Malaysian palm oil, according to the state news agency Bernama.
Malaysian palm prices were also boosted by a strong overnight performance on China's Dalian exchange, an analyst said. Dalian's January palm oil contract rose 2.7% on Wednesday, while the January soyaoil contract rose 1.4%.
Elsewhere, US soyaoil futures on the Chicago Board of Trade were down 0.2%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
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