Tokyo rubber futures hit a 20-month high on Wednesday on the back of strong oil prices and tight physical supply but profit-taking capped the gains, dealers said. The benchmark rubber contract on the Tokyo Commodity Exchange for September delivery rose 3.0 yen to settle at 326.8 yen ($3.48) per kg. It rose as high as 330.3 yen, the highest since August 2008, before investors started taking profits.
Oil was steady on Wednesday, trading near 18-month highs around $87 after a larger-than-expected drop in US gasoline stockpiles signalled fuel demand was rebounding. Higher oil prices make alternative synthetic rubber expensive and usually encourage tyre makers to shift to natural rubber.
"The key reason that supported TOCOM rubber prices was tight supply while firmness in oil prices provided additional support," one dealers said. Physical rubber prices were quoted at a record high, with the benchmark Thai RSS3 offered at $3.65 per kg due to a fall in supply as rubber trees stop producing latex in the dry season. Thai, Indonesian and Malaysian rubber grades have been trading at record prices well above $3 per kg as tyre makers scramble to buy the commodity because of tight supply.
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