UAE Group I base oil outlook mixed amid robust ex-tank demand

SINGAPORE (ICIS)–The near-term outlook for Group I base oil prices in the UAE remain uncertain amid strong demand and short supply in the local markets, market sources said on Thursday.

A bulk of arrivals of Russian product booked in the previous weeks lends uncertainty on the possible prices in late June or July, but demand at present remains strong, buoyed by a shortage in the local ex-tank markets, the sources said.

Import offers for Iranian lots remained capped, as most suppliers were sold out for June and offered only limited volumes for export in July, market sources added.

Discussions were underway early in the week, with unconfirmed deals for end-June or July-arriving Russian cargoes at $570-600/tonne CFR (cost & freight) UAE.

However, these too dried up by the end of the week as sellers sold out their allocations.

Offers for small volumes of Iranian SN500 loading in July remained firm at $600/tonne CFR UAE, sources said.

No offers for Iranian SN150 were heard, but market players deemed prices for the grade at $10/tonne lower than SN500.

Some importers were hesitant to consider these prices for July shipments, as they deemed a price decline possible, with the arrival of Russian product in late June or early July.

Some others, however, deemed prices to remain strong in the weeks ahead, and said that the bulk of arrivals were already absorbed by downstream blenders.

According to market sources, ex-tank prices for SN500 continued to trend at $640-650/tonne for both Russian and Iranian product in the backdrop of limited availability.

Demand in the region remains strong owing to the lack of spot supply despite the Muslim fasting month of Ramadan, an otherwise lull period for trade, a UAE-based blender said.

“Some markets look at crude, and the recent gains in oil prices have also led blenders to restock inventories”, the blender said.

Regional blenders also reported an increase in toll blending orders from major lubricant brands, boosted by a stable-to-firm crude outlook for the rest of the year.

On 9 June, ICIS assessed SN500 spot import prices in the region at $575-600/tonne CFR UAE, up $20-30/tonne. Prices of SN150 were assessed at $565-590/tonne CFR UAE, also up $30/tonne week on week.

Base oils are used in the manufacture of automotive, industrial and marine lubricants.

Top image: Car engine oil (Source: Photographer Auto Express/REX/Shutterstock)
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Focus article by Veena Pathare