SINGAPORE, Nov 26: Tokyo rubber futures are set to track movements in oil prices this week, trading in a range of 20 yen a kg, as tension in the Middle East helps the market resist pressure from high inventory in main consumer China, dealers said on Monday.
Among other soft commodities, Thai sugar premiums could slip as crushing picks up, roasters may chase robustas from Vietnam and Indonesia, and Asian butter ratios enjoy firm demand from chocolate makers in Europe.
The most active rubber contract on the Tokyo Commodity Exchange, April, rose as high as 263 yen a kg, to stand at its strongest since Oct. 29, on a weaker yen and gains in oil. In theory, high crude oil makes synthetic rubber more expensive.
‘I think crude oil is supportive for rubber because there are a lot of uncertainties in the Middle East. We are looking at a range of 250 yen to 270 yen, which is the strong resistance level,’ an agriculture analyst in Kuala Lumpur said.
‘But the debt crisis in Europe is grinding. I wouldn’t say bearish or bullish either. It’s a mixed market. I don’t see any follow through buying even if the market moves upward. It’s a ranged market.’
Brent crude held above $111 a barrel as hopes that Greece could avoid a near-term bankruptcy brightened the outlook for oil demand from Europe, while violent protests in Egypt reignited supply concerns.
Rubber inventories in key Shanghai warehouses rose by more than a third from the previous week to reach their highest in 2-1/2 years on Friday, as sluggish demand from end-users swelled stockpiles.
Manufacturers have also turned to cheaper imports to meet their needs. Imports in the first 10 months of the year have risen about six percent from a year ago to stand at 1.75 million tonnes.
In sugar, Japanese buyers could be in the market again to replenish stocks, but premiums for Thai high polarisation, or hipol, raw sugar may fall from last week’s levels of 60 to 65 points because of ample supply.
The International Sugar Organization has raised its forecast for a projected global sugar surplus in 2012/13 to 6.18 million tonnes, saying prices could remain under bearish pressure until the end of the current crop cycle.
Coffee may fare better, with demand from roasters expected to keep differentials steady in Vietnam and Indonesia despite the bearish outlook for the commodity, which has sent prices in London to their weakest since February.
‘Generally, the coffee market has been on the downtrend and we don’t see this reversing very soon because overall, we know that supply largely outpaces demand,’ said Lynette Tan, senior investment analyst at Phillip Futures in Singapore.
‘Comparing arabica to robusta, I think robusta probably has a better chance to reverse the trend, as more commercial buyers are turning to robusta for a cheaper brew.’
Commodities investment guru Jim Rogers told Reuters recently he sees the NYSE Liffe market for robusta futures nearly doubling in size as demand grows, with Asian consumers quaffing more of the traditionally Western drink.
In the cocoa market, butter ratios could stay at their strongest since late 2009 on Christmas demand, tight supply in Europe, and worries that a recent tax move in Ivory Coast could curb grindings.
(agencies)
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