Base oils prices to bottom out in Q2 but a rebound uncertain

19 February 2009 13:12  [Source: ICIS news]

LONDON (ICIS news)--Base oils pricing may be heading for a trough in the second quarter as base oil producers have cut output and global inventories have been worked off gradually, industry players said on Thursday.

Speaking on the sidelines of the ICIS World Base Oils and Lubricants Conference, industry sources said it was unclear whether a rebound in values would follow after the market bottomed out.

Base oils values have been spiralling down in recent months as demand disappeared and producers sold inventories at increasingly lower prices.

But with numbers now down more than 60% from their peaks, many producers across Europe, US and Asia are cutting back production.

"We should see prices bottoming out by Q2 if this continues," said a European base oils trader.

“Except for brightstock where pricing still remains out of sync with the weak demand, other grades are approaching close to rock bottom levels,” added a Middle East trader.

Another factor signalling a bottomed out market was the slowly emerging buying interest, said some base oil sellers.

The main concern among market players was the US market, where price correction started the last and inventories are still high. The efforts to sell and export backed up inventories in the US might still continue to pressure base oil pricing, said Asian buyers.

However, even if base oils prices bottom out, whether they will rebound remained a question mark.

Just like crude oil prices, base oil values might reach a trough and stay there because the real demand is still very weak compared to the first half of 2008, said a Middle East-based buyer.

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By: Anu Agarwal
+65 6780 4359

< previous article(ICIS Chemical Business podcast November 2, 2009)

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