Japan rubber futures recoup early losses on firmer oil

SINGAPORE: Japanese rubber futures recouped early losses on Thursday, tracking gains in oil prices and buoyed by expectations of further supply shortages due to weather-related disruptions.

The Osaka Exchange (OSE) rubber contract for October delivery closed 0.9 yen, or 0.22 percent, higher at 411 yen (USD2.63) per kg after earlier falling up to 1.4 percent.

The rubber contract on the Shanghai Futures Exchange (SHFE) for September delivery gained 140 yuan, or 0.79 percent, to 17,945 yuan (USD2,637.85) per metric ton.

The most-active June butadiene rubber contract on the SHFE fell 770 yuan, or 4.69 percent, to 15,660 yuan per ton.

Oil prices rose over USD1, rebounding from the previous day’s sharp losses, as investors weighed the prospects of a Middle East peace deal succeeding.

Natural rubber often takes direction from oil prices as it competes for market share with synthetic rubber, which is made from crude oil.

Rubber prices are expected to rise further due to likely supply shortages as top producer Thailand’s meteorological agency warned of storms from May 7-12 and cautioned farmers about crop damage and flash floods.

Traders are also watching El Nino forecasts, which are said to be the strongest in a decade.

Although rubber trees are typically hardier than other crops, drier weather could also affect yields, a Singapore-based rubber trader told Reuters.

A zero-tariff policy has been implemented between China and 33 African countries, including the Ivory Coast, but natural rubber has not been included on the list of products eligible for tax exemptions, the China Rubber Industry Association said.

The front-month rubber contract on Singapore Exchange’s SICOM platform for June delivery last traded at 221.1 US cents per kg, up 0.7 percent as of 0700 GMT.