Rubber Trades Near Six-Week Low on Crude Oil Drop, Stockpiles

By Aya Takada

July 22 (Bloomberg) -- Natural rubber futures in Tokyo declined close to a six-week low as a drop in oil reduced the appeal of commodities as an inflation hedge.

Futures decreased for a second day after falling 4.7 percent last week, the largest weekly loss in four months. Crude oil fell in New York as Tropical Storm Dolly is unlikely to affect oil and natural gas operations in the Gulf of Mexico.

``Investors are losing interest in rubber futures because of a stalled rally in oil,'' Takaki Shigemoto, an analyst at Tokyo- based commodity broker Okachi & Co., said today by phone.

Rubber for December delivery lost 0.6 percent to 328.3 yen a kilogram ($3,077 a metric ton) on the Tokyo Commodity Exchange at 1:09 p.m. local time, nearing a six-week low of 325.5 yen set July 18. The most-active contract rose to a 28-year high of 356.9 yen on June 30, as record-high oil boosted production costs for competing synthetic rubber.

Losses were limited as rubber inventories in China, the world's largest consumer, fell last week for the first time in four weeks, underlining the strength of demand, Shigemoto said.

Rubber inventories decreased by 1,020 tons to 21,375 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai exchange said July 18.

In the cash market, Thai shippers offered RSS-3 grade rubber for August shipment at $3.18 a kilogram today, down 10 cents from a week earlier, Shigemoto said.

November-delivery rubber on the Shanghai Futures Exchange, the most-active contract by volume, lost 2.9 percent to 25,200 yuan ($3,695) a ton at the 11:30 a.m. local time break.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net