Consumers pointed at slipping crude oil prices during several trading sessions as a factor to be taken into consideration when negotiating base oil shipments. While crude futures have inched up from lows seen earlier in the year, the upward momentum seems to have slowed due to increased supply from Saudi Arabia and the United States.

However, Brent futures rose to slightly above U.S. $65 per barrel after flare ups of conflicts in Iraq and Syria and the release last week of data showing a decline in U.S. oil storage levels.

Meanwhile, base oil market participants are also turning their attention to the June 5 meeting of the Organization of the Petroleum Exporting Countries (OPEC). Although members are not expected to cut oil output, discussions during the summit could sway oil prices in either direction, analysts said.

Base oil suppliers also argue that it is the demand-supply balance that is determining much of the price trends for base stocks, with tight conditions – particularly for the heavy API Group I and II grades – exerting upward pressure on prices.

A major Southeast Asian refiner was heard to have raised its list prices on its heavy-vis cuts as of May 22. According to sources, the producers Group I solvent neutral 500 and bright stock were increased by $20 per ton, while its Group II 500 neutral also went up by the same amount. This price movement was said to be an indication that prices continue to be exposed to upward pressure.

At the same time, early intimations that demand is starting to slow down are placing a damper on proposed markups by other suppliers, sources said. Demand is typically strongest during the spring months between March and May, and starts to fade in the summer.

Furthermore, in the key base oil market of China, economic uncertainties are a source of concern to players in the downstream finished lubricants segments. The economic growth rate in China is expected to fall below 7 percent, to an estimated pace of 6.6 percent year-on-year in the second quarter, according to a report by Reuters.

There is talk that the industrial and automotive sectors might not see the strong development observed over the last few years, which may ultimately result in reduced demand for lubricants and base oils.

Base oil supply in China was heard to be plentiful, although heavy cuts and bright stock within the Group I category remain snug due both to the lack of imports from Taiwan following the closure of the CPC-Shell Group I plant in Kaohsiung last year, and to ongoing turnarounds at a couple base oil facilities in China. Karamay Petrochemical, a PetroChina subsidiary, was heard to be keeping its bright stock production for captive use to ensure supply for its downstream operations.

A maintenance turnaround is also underway at PetroChinas Group I plant in Xinjiang. That shutdown started in late May and is expected to last two months. The unit can produce 700,000 metric tons per year of base oils. Xinjiangs capital, Urumqi, was the scene of a terrorist bombing last year which shocked the Chinese and brought economic troubles and ethnic conflicts to the region.

More turnarounds are scheduled in coming months at the JX Nippon Oil & Energy and Cosmo Oil plants in Japan, and these should further tighten Group I availability in the region.

Base oil prices in Asia were reported to have undergone a few upward revisions from the previous week, but the movements seemed to be limited to the heavy-vis cuts.

On an ex-tank Singapore basis, Group I SN150 prices were unchanged at $660/t-$680/t, while SN500 was assessed up by $10/t at $750/t-$770/t, and bright stock was also up by $10/t at the low end of the range at $1,090/t-$1,110/t.

On an FOB Asia basis, Group I SN150 was holding at $550/t-$580/t, while SN500 was up by $10/t at $650/t-$670/t FOB. Bright stock prices were up by $10/t at the low end at $1,070/t-$1,090/t FOB.

Within the Group II category, prices for 150N were steady at $570/t-$610/t FOB Asia, and prices for 500N were slightly up by $10/t at the low end of the spread at $700/t-$730/t FOB Asia. Within the Group III segment, 4 centiStoke and 6 cSt oils were stable at $920/t-$940/t FOB Asia, while the 8 cSt grade was also unchanged at $730/t-$750/t FOB Asia.

On the shipping front, a number of inquiries for June space emerged during the week, with most of the cargoes involving movements from South Korea. A 1,500-ton parcel of two grades was being discussed for Yeosu to Tanjung Priok, Indonesia, for June 5-10 lifting. A 500-ton heated lot was expected to be shipped from Yeosu to Taichung, Taiwan, between June 10-15. A 1,000-ton cargo was on the table for Yeosu to Ho Chi Minh, Vietnam, for June 10-20 shipment. A 1,000-ton parcel was likely to be shipped from Yeosu to Jiangyin, China, on June 1-5.

In Japan, a 2,500-ton cargo was being worked on for Mizushima to Ulsan, South Korea, or Hong Kong for June 1-10 shipment.

Upstream, July ICE Brent Singapore futures were trading at $64.74 per barrel in afternoon trading on May 25, compared to $65.27 per barrel on May 18.