Tokyo rubber futures jumped more than 2 percent to touch a fresh 28-year peak above 356 yen on Friday on record high crude oil prices, but prices later drifted lower. The key Tokyo Commodity Exchange rubber contract for December delivery climbed 8.8 yen, or about 2.5 percent, to a peak of 356.7 yen per kg, the highest since March 1980.
It drifted lower to trade at 352.9 yen by 0349 GMT. Tokyo traders, who have said rubber's fate is closely linked with crude oil, said it was inevitable that rubber should head higher with crude oil soaring to a record high.
Also, physical rubber supplies, which usually return somewhere close to normal levels around June after a seasonal decline, are still at low levels, a Tokyo trader said. "There's not as much supply as there would usually be around this time of the year," he said.
He added that smoked rubber appeared to be particularly in tight supply as more rubber was being sold in unsmoked form. Oil prices surged nearly 4 percent to a record of over $140 a barrel on Thursday after Libya said it was studying possible options to cut output in response to potential US actions against producer countries. US light crude for August delivery was down 54 cents at $139.10 in Globex electronic trading.
Rubber prices often benefit from high crude oil prices because investors believe expensive oil will encourage a shift to natural rubber from synthetic rubber, a petroleum product.
Physical rubber prices have hovered at high levels as rain in some areas of producing countries including Thailand, the world's largest, have slowed tapping and caused supplies to remain tight. Buyers have refrained from purchasing actively.