The resumption in purchases by India, the biggest buyer of Malaysian palm oil this year and which has contracted some 70,000 tonnes for December, could support Malaysian palm oil prices, which are near their highest in two years.

Palm oil is crucial for Malaysian economy as it accounted for 2.8% of Malaysia's gross domestic product last year and 4.5% of total exports.

Indian refiners stopped purchases from Malaysia last month, fearing New Delhi could raise import taxes or enforce other measures to curb imports after Kuala Lumpur criticised New Delhi for its actions in Kashmir.

Malaysian palm oil is available at a $5 discount amid congestion at Indonesian ports, said a Mumbai-based dealer with a global trading firm.

"This is giving a few buyers a reason to start buying Malaysian oil in small quantities to run their refineries."

Malaysian crude palm oil (CPO) for December shipments was available at $603 on Thursday, while Indonesian CPO was quoted at $608, dealers said.

Indonesia is the world's biggest producer of palm oil, followed by Malaysia.

In October, India's top vegetable oil trade body told members to stop buying palm oil from Malaysia in a call aimed at helping New Delhi punish the country for criticising India over its policy towards Kashmir.

India's government was angered after Malaysian Prime Minister Mahathir Mohamad said at the United Nations that India had "invaded and occupied" Jammu and Kashmir and asked New Delhi to work with Pakistan to resolve the issue.

India's government has not made any public remarks about imports of palm oil from Malaysia.

"The dispute has been going on for a month but still India hasn't come out with concrete measures. Some traders have started taking risks, assuming it may not impose a duty on Malaysian palm oil," said a Mumbai-based importer.

Palm oil accounts for nearly two-thirds of India's total edible oil imports. India buys more than 9 million tonnes of palm oil annually, mainly from Indonesia and Malaysia.

In the first 10 months of 2019, India bought 4.1 million tonnes of Malaysian palm oil, Malaysian Palm Oil Board (MPOB) data showed.

India's palm oil imports from Malaysia fell to 219,956 tonnes in October from 310,648 tonnes in September and 550,452 tonnes in August, MPOB data showed, as Indian traders stopped signing new contracts.

Indian refiners have contracted around 70,000 tonnes of CPO for December shipments and a small quantity was also bought for January shipment, said a Kuala Lumpur-based palm oil dealer.

India, the world's biggest importer of edible oils, also buys soyoil from Argentina and Brazil, and sunflower oil from Ukraine.

"As palm oil futures have jumped in the last few weeks, Malaysian traders are eager to sell at higher levels before India imposes any restriction," said a New Delhi-based trader.

Malaysian palm oil futures reversed earlier losses and closed higher on Thursday after Reuters reported that India had resumed purchases of the vegetable oil.

By Rajendra Jadhav