FocusAsia Group I low-viscosity base oil to firm up on better demand

11 September 2013 06:01  [Source: ICIS news]

By Junie Lin

Base oils are used in lubricants for the automotive sector.BRISBANE (ICIS)--Spot prices of Group I low viscosity base oils in Asia may firm up in the weeks ahead, given an expected pick-up in demand, as well as high production costs on recent strong crude gains, market players said on Wednesday.

On 6 September, SN150 prices were assessed stable from the previous week at $920-950/tonne (€690-713/tonne) for low viscosity SN150 from the previous week, while high-viscosity base oils – SN500 – increased $20/tonne over the same period to $1,030-1,080/tonne FOB Asia amid stronger demand, according to ICIS data.

Demand for downstream lubricants is seasonally strong in September at the onset of autumn, with producers expected to start building their base oil stocks soon, market sources said.

Regionals base oils prices will likely track the trend in the key China market, wherein demand for heavier grades like brightstock is tapering off, while consumption of SN150 is gaining strength, market sources said.

Chinese local traders have started building up stocks ahead of the peak demand season on expectations that prices will increase as soon as demand recovers, market sources said.

Brightstock prices into China on 6 September weakened by $10/tonne at the high end of the range from the previous week to $1,140-1,200/tonne FOB Asia, according to ICIS data.

Asian base oil sellers are maintaining high offers on concerns over refining margins amid high cost of base oil production because of prevailing strong crude oil prices, market sources said.

At 12.38 Singapore time (05:38 GMT), US crude was hovering at above $107/bb, while Brent crude was being quoted at above $111/bbl amid continued geopolitical tensions between the West and Syria.

But sales of lubricants, the major downstream of base oils, have remained sluggish amid global economic woes, making base oils buyers unreceptive to higher offers.

In India, on the other hand, spot buying interest for base oils was largely missing as the sharp depreciation of the rupee against the US dollar makes imports more expensive.

Buyers opted to adopt a wait-and-see stance until the near-term trend of the Indian currency is established before booking shipments.

Key Indian buyers have been largely running down their inventories and are not keen to step into the spot market this week, market sources said.

($1 = €0.75)

Additional reporting by Whitney Shi

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

By: Junie Lin

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