09 April 2013 04:17 [Source: ICIS news]
By Serena Seng
SINGAPORE (ICIS)--Iranian Group I base oil prices are on an uptrend amid tighter spot availability as Iranian producers had cut their productions ahead of the Iranian New Year holiday, traders said on Tuesday.
Iranian refiners had just returned to the market last week after the Iranian New Year holiday started in late March. Supply was not expected to be able to meet end-April and early May demand as base oils production had just resumed late last week, the traders added.
Moreover, traders have limited cargo on hand and are withholding offers as they expect prices to rise further. This also contributed to a perceived tightness in supply.
“The shortage of cargoes has led to crazy offers in the market, I heard some offers at $1,050/tonne ($808.5/tonne) FOB [free on board] Iran for SN500 cargoes but nobody will accept those prices,” a Middle East-based trader pointed out.
“Buyers may accept $1,000/tonne FOB in the long run but not currently as Russian cargoes are available at $980/tonne FOB,” an Indian trader added.
Demand for Iranian cargoes has been firming in weeks leading up to the Iranian New Year holiday as it is a traditional peak demand season.
However, demand is especially firm this year because of shortages in Group I base oil cargoes from Asia which prompted some buying interest for Iranian cargoes from that region, a Singapore-based trader said.
While many buyers refused cargoes offered at the higher prices, several market participants told ICIS that buyers may have to accept them as there are no prompt spot cargoes in United Arab Emirates (UAE).
“I believe most buyers will try to hold on as long as they can but will eventually have to accept the higher offers as no one is offering cheaper cargoes,” the Singapore-based trader added.
Prices of SN150 and SN500 stood at $920-950/tonne CFR (cost & freight) UAE and $930-960/tonne CFR UAE on 9 April in the absence of firm transactions at the higher offers, according to ICIS data.
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