FocusMideast base oils to rise on firm upstream, low availability

18 January 2013 05:11  [Source: ICIS news]

By Andrea Heng

Engine oil being checkedSINGAPORE (ICIS)--The Middle East prices of Iranian Group I base oils will rise further in the first quarter of 2013 in tandem with firmer feedstock costs and lower availability amid strengthening demand, buyers and sellers said on Friday.

The spot prices of Iran-origin Group I SN150 base oils were assessed as $50/tonne (€37.50/tonne) higher week on week to $$870-890/tonne CFR (cost & freight) United Arab Emirates (UAE) in the week ending 17 January, ICIS pricing data showed.

The prices of Iranian Group I SN500 base oils, the most widely traded grade, also rose by $50/tonne to $900-940/tonne CFR UAE compared with the previous week, according to the data. 

Around 50,000 tonnes of Group I base oils landed in the UAE from Iran during the first two weeks of January.

An estimated 20,000 tonnes were traded from the UAE to India, while the remainder was sold to the ex-tank market in the UAE.

In the ex-tank market, prices were assessed as $30-50/tonne firmer to $870-910/tonne ex-tank Sharjah for SN150 base oils and $900-940/tonne ex-tank Sharjah for SN500 material, reflecting deals and discussions heard during the same week, the ICIS data showed.

It is estimated that 90-95% of base oils in the UAE originate from Iran, according to industry participants.

Some buying activity emerged during the week, with two deals sealed totalling 11,000 tonnes of SN500 material for shipment in January.

However, traders have decided to withhold the remaining volumes for February in anticipation of further price hikes.

“I have some inventory, mostly of SN500 base oils, but I’m not keen on marketing the product to buyers yet,” a seller said.

“Many sellers in the UAE believe prices will rise to around $940-950/tonne CFR UAE for Iranian SN500, so I am planning to withhold my existing stock as I heard there will be limited volumes from the refineries for February,” the seller added.

A buyer from the downstream lubricant blending sector said; “I’ve heard that there is no availability of SN500 base oils in the UAE because the traders are expecting prices to be stronger for February cargoes.”

 “There are also limited volumes of SN150 in the market and I heard sellers marking up the prices of this grade for February,” the buyer added.

According to a trader, the bullish market was expected by some market participants after consecutive price declines in the final quarter of 2012.

“Prices of lube cuts, which is the feedstock specifically for the production of base oils, have risen in line with the overall firmer crude and gas oil prices,” the trader said.

However, some end-users were uncertain of the extent of the price increases.

“Crude has strengthened, but not significantly. I think the impact on the base oils market is too immediate, so I prefer to wait until a clearer direction emerges,” an end-user said.

($1 = €0.75)

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

By: Andrea Heng
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