Oil Report

Tokyo rubber rises, hits three-week high

TOKYO, Feb 4 (Reuters) - Tokyo rubber futures rose on Monday but market sentiment was fragile as a mixture of bullish and bearish factors tugged at the market, while the lead contract hovered above 300 yen after hitting a three-week high.

The benchmark rubber contract for July delivery <0#JRU:> on the Tokyo Commodity Exchange rose as high as 304.1 yen per kg, up 2.3 yen or about 0.8 percent from Friday’s close.

It was the highest level since the lead contract sprinted to 306.5 yen on Jan. 15.

It was trading at 302 yen at 0050 GMT.

A decline in U.S. crude futures on fresh signs of weakness in U.S. economic growth weighed on TOCOM rubber.

The slowdown stoked concerns that a possible recession would cut into oil demand in the world’s top energy consumer.

Rubber prices often benefit from high crude oil prices because investors believe expensive oil will encourage a shift to natural rubber from synthetic rubber, a petroleum product. NYMEX crude for March delivery CLc1 fell 53 cents to $88.43 a barrel in Globex electronic trading by 0044 GMT.

In the currency market, a weaker yen, which often invites buying in Tokyo as it inflates yen-based futures prices such as TOCOM rubber, provided support.

The dollar JPY= edged up 0.1 percent against the yen to 106.65 yen, keeping some distance from a three-year low of 104.95 yen struck on EBS last month.

Rubber supplies have tightened due to the rainy season in Indonesia, the world’s second-largest producer, when tapping is frequently disrupted.

The start of the wintering dry season in Thailand and Malaysia, the world’s top and third-largest producers, have also contributed to the supply tightness.

Latex output falls during this period. (Reporting by Miho Yoshikawa)