Week ahead, lots of risk

Crude oil prices reached a two-month high and have posted their best weekly gains this year on efforts to curb production by the OPEC. Falling U.S. crude and fuel stockpiles and Saudi Arabia's promise to cut exports in August aided sentiment in the market.

The International Monetary Fund has kept India’s growth forecast for next year unchanged at 7.7% in its latest World Economic Outlook report. While IMF projected global growth at 3.5% this year.

Against the backdrop of a decline in factory output, with inflation at a five-year low and one has to wait and see whether Reserve Bank of India (RBI) will cut at least 25 basis points in the policy interest rate or keep it unchanged, the announcement is scheduled on 2nd August. Any rate cut has to act as a catalyst for spurring economic growth and not just to aid market sentiment.

The fall in inflation is not due to prudent fiscal management but because of a slowdown in the economy. While liquidity continues to flow unabated, when valuations are stretched and geopolitical tensions are rising, it is better not to risk.

The benchmark RSS4 grade rubber closed at `.132 a kg at Kottayam, while RSS3 grade closed at `.116.34 a kg at Bangkok and Malaysian SMR20 closed at `.94.18 a kg. On National Multi Commodity Exchange August 2017, the futures closed at `.130.96 a kg, September at `.129.85 and October 2017 closed at `.127.09 a kg. Tokyo Commodity Exchange August 2017 futures series closed at ¥203 a kg, September at ¥204.1, October at ¥203.4, November at ¥204, December at ¥203.1 and the contract for delivery in January 2018 closed at ¥204.5 a kg. On Monday, most probably Tocom futures contract for delivery in January 2018 may trade in the positive range of ¥202 & ¥208 a kg.

To read Rubber4U – 1st August 2017 issue: http://rubber4u.com/Public/Abcd.pdf

For 2017-18 Rubber Forecast: http://rubber4u.com/Public/RForecast.pdf

Lots of expectations, but at risk

Benchmark Tokyo rubber futures jumped to a 2-week high as stronger Shanghai futures and an overnight gain in oil prices boosted risk appetite. Hopes were high for higher oil prices at the beginning of the year with the start of the OPEC cuts. Oil prices rose and hit a one-week high, boosted by a weaker dollar and short covering, although they slipped after an industry report said U.S. inventories increased.

The oil price recovery also faltered at some point as it became evident that the glut was not diminishing as fast as it was expected and that rising U.S. shale output and continued recovery of production from exempt Libya and Nigeria were offsetting a large part of OPEC’s cuts. And if Chinese demand growth is not as strong as OPEC and the market hope for, the glut could take even longer to clear, and oil prices could stay lower for even longer.

According to data from the Rubber Trade Association of Japan showed, crude rubber inventories at Japanese ports stood at 4,999 tonnes as of 20th June, up by 5.8% from the previous inventory date. While crude rubber inventories at Japanese ports stood at 6,723 tonnes as of 10th July, up by 5.9% from the last inventory date. According to exchange, rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.5% from the previous Friday.

Today, benchmark Tokyo rubber futures fell more than 2%. Rubber prices have come under pressure as higher inventories in both Japan and China prompted selling, while weaker oil prices and a stronger yen against the US dollar also weighed on market sentiment. The Tokyo Commodity Exchange (TOCOM) rubber contract for December delivery closed 2.4%, lower at ¥209.3 per kg, after touching a low of ¥206.9 earlier in the session.

The benchmark RSS4 grade rubber closed at `.139 a kg at Kottayam, while RSS3 grade closed at `.116.51 a kg at Bangkok and Malaysian SMR20 closed at `.98.92 a kg. On National Multi Commodity Exchange August 2017, the futures closed at `.136.72 a kg, September at `.135.96 and October 2017 closed at `.133.26 a kg. Tokyo Commodity Exchange July 2017 futures series closed at ¥202.4 a kg, August at ¥201.9, September at ¥205.3, October at ¥206.6, November at ¥208.3 and the contract for delivery in December 2017 closed at ¥209.3 a kg. On Tuesday, most probably Tocom futures contract for delivery in December 2017 may trade in the positive range of ¥209 & ¥215 a kg.

To read Rubber4U – 1st August 2017 issue: http://rubber4u.com/Public/Abcd.pdf

For 2017-18 Rubber Forecast: http://rubber4u.com/Public/RForecast.pdf