16 July 2013 17:29 [Source: ICIS news]
LONDON (ICIS)--European domestic base oil prices are likely to remain stable in the near future as buyers and sellers compromise over their desired outcomes, sources said on Tuesday.
Buyers are looking for price decreases as a result of persistently poor demand, although several noted that demand levels in July had not decreased by as much as had been widely expected during the holiday season. They added that operating conditions remain extremely difficult, with year-on-year demand for this period much lower than in 2012.
However, producers questioned the extent to which demand would be stimulated by lower base oil prices. Poor downstream finished lubricant demand is understood to be a result of the struggling European car industry and wider economic problems, meaning that the price of base oils was deemed to be largely irrelevant.
Furthermore, with crude oil and vacuum gasoil prices having increased recently, base oil producers’ margins are also becoming increasingly squeezed, and several said they would like to see prices increase as a result.
“It is difficult, with VGO prices up our margins are squeezed. I want to increase prices but customers want decreases. [A decrease] is not on the cards, but I also think it could be difficult to get an increase accepted,” said a producer.
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