The higher offers are supported by prospects of tight supply in coming weeks on the eve of a planned turnaround at Formosa Petrochemical’s base oil plant in Mailiao, Taiwan, along with recent and ongoing shutdowns at other regional facilities amid lean inventories.

However, the number of producers that can actually supply spot cargoes is also limited, as most sellers have to ensure they have enough material to cover contractual commitments before they can allot product for spot transactions.

Requirements have improved compared to the beginning of the year, but they are not exceptionally robust as conditions in downstream lubricant segments are still somewhat uncertain, sources explained. What is driving some of the demand is that buyers have been carrying fairly low inventories since mid-2015 because of the downward trend in pricing.

As a result, many have started the year with little material on hand and these buyers are now actively seeking cargoes for short-term delivery, but some sellers have little to no material to offer.

In Southeast Asia, it was heard that a refiner is ensuring that it can meet domestic requirements and its own downstream demand before offering cargoes for spot business, and a similar situation applies to suppliers in Northeast Asia.

In China, importers appeared to be scrambling to locate spot cargoes of the heavy-vis cuts as domestic supply is described as tight, particularly for Group II oils.

Formosa is one of the main suppliers of Group II base oils to China. The producer has been restricting the volumes shipped to that country as it is preparing for a two-month turnaround starting in June.

Group I base oils are also snug, with buying interest for solvent neutral 500 and bright stock growing over the last few weeks, but domestic availability of Group I material is better than for Group II cuts and prices for SN150 have remained fairly stable.

Base oil price discussions were generally taking place at higher levels than last week, although some buyers were resisting offers because of difficulties in transferring the cost down the supply chain.

Sources acknowledged that the uptrend may be temporary and that prices may stabilize once supply and demand reach a more balanced position.

For the time being, however, many consumers had to accept the prevailing prices if they wanted to secure product to meet immediate needs.

There were few changes to indications on an ex-tank Singapore basis after assessments had been adjusted up the previous week. The Group I SN150 cut was steady within a range of between $530 per metric ton and $550/t ex-tank Singapore, and SN500 was unchanged at $600/t-$620/t. Bright stock was discussed at $1,010/t-$1,030/t ex-tank Singapore.

The Group II 150N cut was heard at $510/t-$530/t ex-tank Singapore, and the 500N was revised up by $15/t-$25/t at $640/t-$670/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was mentioned at $430/t-$450/t; the SN500 was adjusted up in line with discussions and published prices widely regarded as industry benchmarks, reflecting a $30/t-$40/t upward revision at $510/t-$540/t FOB. Bright stock edged up by $10/t-$20/t to $900/t-$930/t FOB this week.

In the Group II category, the 150N cut was assessed up by $10/t at $480/t-$510/t FOB Asia, while the 500/600N moved up by $20/t to $620/t-$650/t FOB Asia.

The 4 centiStoke and 6 cSt oils were notionally adjusted up by $10/t at $860/t-$890/t FOB Asia, and the 8 cSt grade was assessed at $610/t-$630/t FOB Asia on rising feedstock prices and higher offers.

Rising crude oil values offered additional support to steeper base oil prices in Asia. Brent and West Texas Intermediate futures have rallied more than 70 percent since hitting their respective 2016 lows in January and February.

Oil futures stabilized after setting new 2016 highs on Thursday as traders locked in profits, though analysts said supply disruptions, strong investor appetite and a weakening dollar could push prices higher, according to a Reuters report.

Another factor that impacted futures was the possibility of reduced supply from Venezuela as the country faces a serious electricity crisis.

Falling U.S. crude production has also offered support to oil prices, while a weaker dollar makes crude cheaper for countries using other currencies. The U.S. Federal Reserve said on Wednesday it would leave interest rates unchanged, while the Bank of Japan said on Thursday it would abstain from expanding monetary stimulus, pushing the yen higher against the dollar.

ICE Brent Singapore futures closed at $46.79 per barrel in afternoon sessions on May 2, compared to $44.67 per bbl on April 25.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.