BEIJING: Japanese rubber futures hit their highest level in more than a year on Monday, lifted by strong crude oil prices and concerns over declining production in top producers Thailand and Indonesia.

The Osaka Exchange rubber contract for March delivery ended 0.39% higher at 260.6 yen ($1.74) per kg, hitting its highest closing since June 10, 2022.

Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.7 % from last release on Sept. 28, the exchange said on Friday. Japan’s Nikkei share average fell 2.03% dragged by chip-related shares, with risk appetite being hurt as tensions in the Middle East escalated.

The period from mid-September to mid-January is typically the peak production season globally, but largest producers Thailand and Indonesia are instead facing a production downtrend, Jom Jacob, co-founder of India-based analyst firm What Next Rubber.

“Unless production returns to normal, there could be considerable shortage in the forthcoming lean season of production from end-January to end-June.”

The rubber contract on the Shanghai futures exchange for January delivery was up 30 yuan at 14,750 yuan ($2,017.43) per metric ton. The front-month rubber contract on Singapore Exchange’s SICOM platform for January delivery last traded at 148.2 US cents per kg, up 0.3%.

Oil prices fell after rallying to more than $90 per barrel, with investors waiting to see if the Israel-Hamas conflict draws in other countries - a development that would potentially drive up prices further and deal a fresh blow to the global economy.

Natural rubber often takes direction from oil prices as it competes for market share with synthetic rubber, which is made from crude oil.