20 November 2012 06:49 [Source: ICIS news]
By Andrea Heng
SINGAPORE (ICIS)--Spot base oil prices in the Middle East may continue falling, as weak buying interest amid ample inventories is forcing sellers to lower their offers, market sources said on Tuesday.
In the week ended 15 November, prices of Group I SN150 base oils were assessed at $885-890/tonne (€690-694/tonne) CFR (cost & freight) UAE, down by $25-30/tonne, according to ICIS.
Group I SN500 base oils, meanwhile, were at $900-935/tonne CFR UAE, down by $25-50/tonne over the same period, the data showed.
Since late September, UAE-based traders faced difficulties liquidating their base oils stock because of weak demand from downstream lubricants producers. Supply levels were mounting, resulting in fewer cargoes being moved to the UAE.
About 90-95% of the base oil cargoes in the UAE at any given time are of Iran origin, industry sources said.
Refiners in Iran reduced their offer prices from the start of the third quarter of this year in a bid to boost buying interest.
“Downstream sectors have healthy inventories to last until the end of this year, with only small volumes required, so this resulted in fewer shipments to the UAE,” a seller said.
During the same period, Iran’s alternative markets, such as India, were also full on base oil inventories, thus adding to the weak regional demand.
“Domestic producers in India cut their Group I and Group II prices in October, so buyers in the country did not need to import at this time,” a buyer said.
Base oils supply in India was at high levels, leaving Iranian producers with not much outlet for their output, market sources said.
Still, Iranian base oils producers were running their plants at 80-90% of capacity, they said.
“The reason behind this [the high run rates] is unknown. The producers should have lowered their production rates in the face of growing supply,” a trader said.
In October through to November, a major supplier had issued multiple tenders without concluding them, “in order to check market sentiment and price ideas”, the trader said.
Iranian base oils suppliers eventually were able to seek outlets in India, with 21,000 tonnes of combined Group I SN150 and SN500 base oils sold to four to five buyers in the south Asian country for prompt shipment in the week ended 15 November.
The SN150 was sold at around $850/tonne FOB (free on board) Bandar Imam Khomeini (BIK), while the SN500 cargoes were sold at $862/tonne FOB BIK.
In addition, the demand for Group II base oils strengthened in the UAE, albeit in small volumes.
Around 3,000 tonnes of Group II northeast Asia-origin 150N and 600N base oils were heard to have arrived in the UAE. An additional 2,000-3,000 tonnes of Group II 500N of the same origin are expected to arrive in the week ended 23 November.
($1 = €0.78)
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