Japanese rubber futures rise on stronger crude oil

SINGAPORE: Japanese rubber futures rose on Wednesday to their highest since December 1, buoyed by gains in crude oil prices and a tightening supply outlook. The Osaka Exchange (OSE) rubber contract for May delivery was up 6.3 yen, or 1.93 percent, at 333.3 yen(USD2.14) per kg.

The rubber contract on the Shanghai Futures Exchange (SHFE) for May delivery rose 215 yuan, or 1.42 percent, to 15,390 yuan (USD2,184.62) per metric ton.

The most-active February butadiene rubber contract on the SHFE gained 305 yuan, or 2.81percent, to 11,160 yuan per ton. The yen weakened to 155.145 per dollar, ahead of an expected interest rate hike by the Bank of Japan. A weaker Japanese currency makes yen-denominated assets more affordable to overseas buyers.

With low new planting in Thailand and other major producing countries in recent years, the growth rate of rubber supply next year will be weak, said Guangzhou Futures.

A shift in Indonesia from rubber planting to high-value-added agricultural products like oil palm and durian will also lead to an inevitable decline in production in the world’s second-largest rubber producer, the Chinese broker said.

Oil prices rose over 1percent on US President Donald Trump’s orders to block sanctioned oil tankers entering and leaving Venezuela. Natural rubber often takes direction from oil prices as it competes for market share with synthetic rubber, which is made from crude oil. Japan’s Nikkei closed 0.26 percent higher, rebounding from a two-week low hit in the previous session as technology stocks tracked overnight gains on the Nasdaq.

Top rubber producer Thailand’s meteorological agency warned of heavy rains and accumulations that may cause flash floods and overflows from December 16-22.

The front-month rubber contract on Singapore Exchange’s SICOM platform for January delivery last traded at 176 US cents per kg, up 0.6percent.

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