Oil Report

Tokyo rubber off 16-mth high, but bull trend stays

TOKYO, Nov 2 (Reuters) - Tokyo rubber futures edged down after hitting a 16-month high on Friday, but sentiment stayed bullish, supported by firm demand from investment funds and firm physical prices.

Japanese rubber futures fell by late afternoon in response to declines in energy and other commodities as investors locked in their profits after seeing them surge about 20 percent in the last month, traders said.

Renewed credit concerns linked to the U.S. subprime mortgage crisis hit Wall Street stocks the previous day, leading to strong fund sales of commodities, such as rubber.

“Overall falls in commodities prices put pressure on rubber, but there is plenty of interest by funds to roll over into the distant end of the market,” said Hisaaki Tasaka, market analyst at Ace Koeki Co Ltd in Tokyo.

“Fundamentals are important, but more than that, demand from funds is strong in the current market sentiment,” Tasaka said.

The key April 2008 contract on the Tokyo Commodity Exchange <0#JRU:> touched an intraday high of 307.4 yen a kg -- the highest for any benchmark contract since July 4, 2006.

Benchmark TOCOM rubber closed at 301.7 yen, down 2.0 yen or 0.7 percent from Thursday’s close. It fell to as low as 301.5 yen in the morning trade.

Other contracts closed down 0.9 to 2.8 yen.

The next key technical point for the key contract would be 324.5 yen -- last year’s high reached on June 13.

Speculative sales in TOCOM rubber could have intensified after seeing a big build up of Japanese rubber stocks.

The Rubber Trade Association of Japan said on Thursday crude rubber inventories held at domestic warehouses rose 10.6 percent to 8,618 tonnes by Oct. 20 from 7,792 tonnes by Oct. 10. [ID:nT280608]

In the longer term, the market was watching crude oil prices and developments in financial markets before building more buy positions.

U.S. crude oil futures fell on Thursday from a record high amid worries over the health of the U.S. economy.

Oil’s decline came as brokerages downgraded the two largest U.S. banks, renewing fears of further fallout from the credit crisis. [ID:nN01435827]

But rubber is expected to be supported by firmness in tyre grade rubber, with persistent rains in Thailand, the world’s top producer.

Asian physical rubber prices were slightly lower to unchanged on Friday, but supported by supply concerns.


Grade Price Change

Thai RSS3 (December) $2.55/kg unchanged

Thai RSS3 (January) $2.55/kg unchanged

Thai STR20 (December) $2.45/kg unchanged

Thai STR20 (January) $2.45/kg unchanged

Malaysia SMR20 (December) $2.43/kg unchanged

Malaysia SMR20 (January) $2.43/kg unchanged

Indonesia SIR20 (December) $1.08/lb -$0.01

Indonesia SIR20 (January) $1.08/lb -$0.01

Thai USS3 80 baht/kg unchanged

Thai 60-percent latex (drums, Dec) $1,700/tonne unchanged

Thai 60-percent latex (bulk, Dec) $1,600/tonne unchanged