Tokyo rubber futures ended almost 1 percent higher on Monday, supported by rising oil prices and tight supply, but failed to break above resistance at 300 yen as profit taking set in. The benchmark rubber contract on Tokyo Commodity Exchange for October delivery settled at 292.0 yen ($2.41) per kg, up 2.7 yen or 0.9 percent from Friday's close.
TOCOM prices rose in trade, driven mostly by speculative buying backed by rising oil prices, which usually benefit natural rubber prices as expensive oil encourages the use of it in place of synthetic rubber, a petrochemical product.
Oil prices rose on Monday, hovering near $70 a barrel on supply concerns surrounding major producers Iran and Nigeria. But TOCOM prices failed to maintain their drive toward resistance at 300 yen as speculative day-traders took profit at around 294 yen, dealers said.
However, TOCOM prices were expected to challenge 300 yen again on Tuesday as tight supply still provided support, traders said. "Prices should rise further this week as everybody realised that supply is still tight while demand is increasing, especially from China," a dealer said.
China, the world's biggest rubber consumer whose purchases dipped in the first quarter of this year, is keen to buy and may focus on cheaper tyre-grade rubber from Indonesia, traders said. Physical rubber prices tracked the rise on TOCOM with trading expected to be busy this week as China was in the market asking to buy Thai RSS3 for prompt shipment, traders said.
"Indonesia alone could not fill China demand so it needs to turn to Thailand, even though our prices are higher," said a trader in Thailand's Hat Yai rubber centre.
Supply in Thailand and Malaysia was improving as rains tapered off, but raw material prices for export-grade rubber sheet (USS3) remained high due to increasing demand, traders said.