Rubber retreated from a one-month high as crude oil declined amid concern that slower economic growth may curb demand, cutting the appeal of the commodity as an alternative to synthetic products.

Rubber for December delivery lost 3.3 percent to settle at 274.4 yen ($3,094 a metric ton) on the Tokyo Commodity Exchange, the lowest level in a week. The price climbed yesterday to the highest level since May 28, as rainfall disrupted output in Thailand, the biggest producer and exporter.

Crude oil declined 2.2 percent at 3:51 p.m. in Singapore on skepticism that production in the Gulf of Mexico will be disrupted by a tropical storm in the region. U.S. forecasters projected that Tropical Storm Alex will move across the southern Gulf and make landfall as a hurricane July 1 in Mexico.

“A drop in oil was the largest drag on the price of rubber,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone. “An unclear outlook for global economies also sapped investor appetite for industrial commodities.”

“A stronger Japanese yen and worries over cooling global economic expansion have had a negative psychological effect on the rubber market,” said Varut Rungkhum, analyst at Bangkok- based commodity broker Agro Wealth Ltd.

The yen rose to a seven-week high against the dollar as signs the global economic recovery is slowing boosted demand for Japan’s currency as a refuge. Japan’s currency rose to 88.63 against the dollar, compared with 89.37 yen yesterday.

China Stockpiles

Stockpiles in China declined to the lowest level in seven years, sparking optimism that the world’s biggest buyer may soon replenish inventories, data showed. Natural rubber stockpiles monitored by the Shanghai Futures Exchange dropped 1,670 tons to 14,771 tons, the bourse said on June 25. It was the lowest level since January 2003, according to Bloomberg data.

China, the largest auto market, is the biggest consumer of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

November-delivery rubber on the Shanghai Futures Exchange lost 2.4 percent to settle at 21,735 yuan ($3,198) a ton.

Cash prices in Thailand declined as Chinese buyers have shifted to purchasing cheaper rubber from Indonesia, the Rubber Institute of Thailand said on its website today. The Thai benchmark price dropped 0.6 percent today to 118.10 baht ($3.67) a kilogram, it said.

Source: Bloomberg

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