Tokyo rubber futures edged higher on short-covering on Thursday after the key contract fell to a three-month low, but gains were limited by profit taking. The benchmark rubber contract on Tokyo Commodity Exchange for November delivery rose 0.8 yen to settle at 265.8 yen ($2.15) per kg.
The benchmark recovered from the session low of 261.4 yen, the lowest since mid-March, after falling its daily 10-yen limit on Wednesday to close at 265 yen. "Players covered their short positions, especially ones who hammered prices down on Wednesday, but the rises were limited by profit-taking which capped gains," a dealer said.
TOCOM prices were supported by oil prices inching 5 cents higher to $68.91 barrel, with dealers still concerned about a general strike in Nigeria and unusually low US refinery operations. TOCOM rubber usually benefits when oil prices rise as expensive oil encourages the use of natural rubber instead of synthetic rubber, a petrochemical product.
TOCOM prices were likely to rebound on Friday after the key contract stayed above 265 yen, a strong support level, dealers said. On the physical front, rubber prices fell despite the small rise on TOCOM. Trading was more active, with several tyre-makers in the market and producers liquidating stocks, traders said.
Physical prices were likely to slide next week as supply was expected to pick up with rain subsiding in some provinces along Gulf of Thailand, such as Surat Thane and Nakano Is Thammarat, both major producing areas, they said. "But prices shouldn't fall sharply as there is still rain in the far south and demand remains strong," a trader said.
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