FocusMideast base oils outlook mixed on firmer crude, weak demand

11 January 2013 04:36  [Source: ICIS news]

By Andrea Heng

Mideast base oil prices show mixed trendSINGAPORE (ICIS)--The Middle East base oil outlook is mixed as sellers are targeting higher prices in tandem with firmer crude costs, while buying sentiment remains bearish as domestic inventories in key importing markets are sufficient, industry sources said on Friday.

Spot prices of Group I base oils in the Middle East rose by during the week of 11 January because stronger crude and gas prices have led to firmer selling sentiment, according to the sources.

However, demand remains weak as customers are still hesitant to book fresh cargoes since inventories in key importing markets, such as India, are sufficient to meet local demand. Most of the inventories were sourced from local refiners.

“Domestic Indian refiners have been able to supply sufficient material to the Indian market, so import demand has slowed significantly,” a buyer said.

Around 90% of base oils in the United Arab Emirates (UAE) are imported from Iran and most of the material is sold to India, according to market players.

The prices of Group I SN150 base oils were assessed as $20/tonne (€15/tonne) higher week on week at $820-840/tonne CFR (cost & freight) UAE on 10 January, according to data from ICIS pricing.

The prices of SN500 base oils were at $850-890/tonne CFR UAE on the same day, up by $30-50/tonne week on week, the data showed.

Most traders in the UAE initially expected demand from the downstream lubricant blending sectors to improve following the seasonal lull during the Christmas and New Year holiday.

“Despite the previously positive outlook, demand recovery has been slow and some sellers are faced with cargoes that they are unable to sell,” a source said.

A UAE-based seller is negotiating for 3,000 tonnes of Group I SN150 and 3,000 tonnes of Group I SN500 base oils from Turkey.

“I am targeting to sell this Turkish cargo at $910-920/tonne CFR India as it seems that the market has picked up there,” the trader said.

An Iranian cargo purchased by a separate UAE-based trader at $840-850/tonne FOB (free on board) Bandar Imam Khomeini (BIK) was heard being offered to India at $930/tonne CFR India.

However, there are other players who are less optimistic about the rise in base oil prices.

“If the Indian market is unable to accept the higher prices then the UAE market is likely to follow suit as it is already slow-moving,” a separate source added.

Both buyers and sellers have resultantly largely retreated to the sidelines in anticipation of a clearer price direction and in view of the uncertain market outlook.

($1 = €0.75)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Andrea Heng
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