Japanese rubber futures struggle for direction on higher oil prices

SHANGHAI: Japanese rubber futures snapped two sessions of losses on Monday, gaining on higher oil prices.

Expectations that oil prices would rise further also prompted traders to secure more buffer inventories. The Osaka Exchange (OSE) rubber contract for October delivery closed 1 yen, or 0.24 percent higher at 414.20 yen (USD2.61) per kg. The rubber contract on the Shanghai Futures Exchange (SHFE) for September delivery rose 90 yuan, or 0.51percent, to 17,690 yuan (USD2,599.37) per metric ton. The most active June butadiene rubber contract on the SHFE gained 695 yuan, or 4.48 percent, to 16,195 yuan per metric ton.

Global rubber futures ended last week lower on profit-taking by commodity funds and long liquidation, with recent price rallies having attracted more than 500,000 tons of new long rubber futures positions, and funds estimated to have liquidated around one-third, or 200,000 tons, during the past week, according to a report by the Japanese Exchange Group. Persistently high crude oil prices have heightened inflationary pressures, with traders increasingly expecting the Federal Reserve to raise interest rates following stronger-than-expected US producer prices for April.

Oil prices extended gains on Monday as efforts to end the Iran war appeared to have stalled, after a nuclear power plant in the United Arab Emirates came under attack and as US President Donald Trump is expected to discuss military options on Iran.

Expectations that oil prices would rise further prompted traders to snap up existing cargoes and maintain buffer inventories, a Singapore-based rubber trader said. Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 2.7percent from last Friday, the exchange said on Friday. The front-month rubber contract on Singapore Exchange’s SICOM platform for June delivery last traded at 221.9 US cents per kg, up 0.3percent as of 0700 GMT.