SINGAPORE: Japanese rubber futures ended nearly flat on Thursday, as fears of global inflation countered expectations that soaring oil prices may encourage a shift to natural rubber from synthetic rubber.

The Osaka Exchange rubber contract for August delivery finished 0.1 yen higher at 260.0 yen ($2.25) per kg.

Oil prices extended their rally on Thursday, with Brent rising above $118 a barrel, as trade disruption and shipping issues from Russian sanctions over the Ukraine crisis sparked supply worries, while US crude stocks fell to multi-year lows.

Synthetic rubber is derived from crude oil, and higher oil market serves as a driver for natural rubber prices as well. Natural rubber market also benefits from stronger oil prices, as that could lead to a shift from synthetic rubber.

“We are cautious because crude oil prices are so high. Everyone’s saying this will lead to inflation and higher logistic costs,” a Singapore-based trader said.

While strong raw material and oil prices did not translate to higher rubber prices today, rubber prices are still not going down and remain supported, he added.

The crisis in Ukraine could hurt Japan’s economy by driving up the price households and companies pay for fuel and commodities, a central bank policymaker said on Thursday, signalling the need to maintain massive stimulus to support a fragile recovery.

Japan’s services sector activity shrank in February at the quickest pace in nearly two years, a survey showed on Thursday, as business took a hit from struggling consumer sentiment after a record spike in infections of the Omicron coronavirus variant.