Middle East Group II/III base oils weighed down by soft demand - ICIS

SINGAPORE (ICIS)--Middle East Group II and Group III base oils prices were stable to soft this week but were under strong downward pressure with the bearish market likely to continue because demand has shown no sign of improvement yet.

In the Group II segment during the week ending 3 October, import prices of 150N in the United Arab Emirates (UAE) were stable to soft at $630-660/tonne CFR (cost & freight) UAE, with the low end reduced by $10/tonne while the high end was kept on hold.

The range reflected price for spot Asian Group II 150N material, offered at $640-660/tonne CFR UAE.

But buying indications were lower with most buyers in the UAE showing little interest to conduct any business above $640/tonne CFR UAE.

“It is a tough environment, considering the intense competition,” said one seller.

Buyers said there were sufficient Group II cargoes available in the domestic market to meet their immediate needs and they were not under any pressure to replenish inventories.

As such, they were unwilling to meet suppliers’ initial offer prices.

“No takers as prices are falling and there has been no surge in demand,” said a Middle Eastern source.

Group II sellers noted there were higher costs currently associated with shipping base oils cargoes to destinations in the Middle East because of higher risks and increased geopolitical tensions.

Most sellers would be unwilling to sell any cargo below $640/tonne CFR UAE to protect their profit margins, market sources added.

Prices of Group II 500N were maintained at the previous week’s range of $650-670/tonne CFR UAE because of the limited spot discussions for any Asian-origin material this week.

There have been demand interest noted for heavier-grade material but again suppliers have been reluctant to offer anything at current prices, which they deemed to be too low.

In Group III, prices in the ex-tank UAE market this week were sharply reduced, also pressured by the slow demand interest within the regional market.

Supply was understood to be ample but cargo off-take at the previous week’s prices were frustratingly slow and that put severe downward pressure on prices, which were eventually reduced to stimulate further buying interest.

“We've actually never seen such small volumes being bought before,” said another Middle East source.

The weak demand for Group III reflected the broader market with many buyers waiting on the sidelines and showing reluctance to commit to any purchase volume.

The ample supply in the ex-tank UAE market was also fueling talk that Middle East export cargoes would also be under some downward pressure due to the ample supply and soft demand conditions.

ICIS Editorial Chart goes here (Top image: Base oils are used to make lubricants)