FocusMideast Group I SN150 prices may record new 24-week high

18 April 2012 09:49  [Source: ICIS news]

By Quintella Koh

SINGAPORE (ICIS)--Prices of Group I SN150 base oil in the Middle East could record a new 24-week high on the back of strong regional demand, competition for Group I SN150 spot material from Turkey and Africa as well as tight regional supply, market sources said on Wednesday.

Trades reported from producers, distributors, traders and end-users, confirmed the continued rise in prices of the material.

A tender issued by a producer in the first week of April for 4,000 tonnes of Group I SN150 was sold at around $1,143/tonne (€869/tonne) FOB (free on board) Iran late last week, the market participants said. The parcels are scheduled to be loaded from Imam Khomeini Port in Iran, the market participants added.

A further 1,000 tonnes of Group I SN150 was reported sold at $1,153/tonne FOB Iran. The last Group I SN150 cargo sold by the producer by tender was around $1,050/tonne FOB Iran.

After factoring in spot freight rates of around $25.00/tonne from Iran to the UAE, this implies that the spot Group I SN150 cargoes could reach the UAE's shores at $1,168-1,178/tonne CFR UAE.

The last time Group I SN150 prices crossed the $1,165/tonne CFR UAE was on 3 November last year. Group I SN150 prices were assessed at $1,150-1,165/tonne CFR UAE last week.

“There is going to be a dire shortage of [Group I SN150] cargoes in the UAE until the first week of May. All the distributors are either out of stock or running on low inventories,” said a buyer.

Traders and end-users typically turn to Group I SN150 cargoes from the Black Sea and Baltic Sea regions when spot supply in the Middle East tightens.

However, they have been unable to import Group I SN150 cargoes from these regions in the past few months as the FOB Black Sea and FOB Baltic Sea quotes are priced at above FOB Iran and CFR UAE quotes.

Group I SN150 FOB Baltic Sea quotes were assessed at $1,245-1,275/tonne FOB Baltic Sea on 17 April, up $35/tonne from the previous week. Group I SN150 FOB Baltic Sea quotes were assessed at $1,240-1,270/tonne FOB Black Sea on 17 April, up $30/tonne from the previous week.

Blenders in the Middle East said that they expect demand from the downstream lubricant sector in the UAE, Turkey and Africa to remain healthy in the second quarter of this year.

“Demand from Africa is especially healthy as many buyers had not purchased cargoes in the first quarter of this year due to political instability in the region. However, the buyers from Africa have now returned, and they are purchasing in large volumes at competitive prices,” said a blender.

Market participants said that they are expecting the shortage to ease in the first week of May as almost 3,500tonnes of Group I SN150 will reach the UAE shores.

Meanwhile, as a result of rapidly strengthening Group I SN150 quotes, both on FOB Iran and CFR UAE basis, regional distributors have started raising their ex-tank offers in Sharjah.

Several distributors were quoting Group I SN150 offers at $1,250/tonne ex-tank cash basis, up $50-80/tonne from their offers last week.

A buyer said that it was willing to pay up to $1,180/tonne ex-tank cash basis for Group I SN150 cargoes, up $10/tonne from its bid last week.

($1 = €0.76)

By: Quintella Koh
+65 6780 4372

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