Producers first reacted to the jump in crude oil values in early December, and have been able to implement spot price increases for base stocks on a vast majority of cuts since then.

However, it seemed that buyers were resisting further increases, noting that downstream demand has not yet shown definite signs of growth. Base oil requirements have been rather sluggish because of uncertainties in the various finished lubricant segments, particularly those that cater to the automotive industry.

Economic uncertainties in India and China, two of the driving forces in the region for lubricant consumption, led to decreased requirements during the last quarter of the year.

However, the situation may be changing in India. January proved a mixed bag for the Indian automotive industry as some manufacturers reported increases in sales while others reported flat or reduced sales, according to The Times of India.

Automakers and analysts remain optimistic because of budgetary announcements aimed to stimulate the sector. The Indian government is zeroing in on promoting the rural economy and improving the countrys infrastructure.

The union budget will give boost to the economy, especially rural, with focus on infrastructure creating a robust business environment and thus helping the auto industry and positively contributing to [gross domestic product], Rakesh Srivastava, senior vice president of sales and marketing for Hyundai Motor India Ltd. – the second largest car maker in India – told the newspaper.

Hyundai Motor India Ltd. registered higher sales last month, with 51,834 units sold, up from 44,230 units sold in January 2016.

Indian automotive exports surged by 44.8 percent, with 10,462 units shipped out, up from 7,223 units sold abroad in January 2016.

On the other hand, Tata Motors passenger and commercial vehicle total sales (including exports) came in at 46,349 vehicles, a drop of one percent over 47,035 vehicles sold in the same month last year.

In China, industry participants were also fairly optimistic at the start of the Year of the Rooster.

Chinas economic growth momentum has slowed in recent years, but it appears to have stabilized, with growth in its GDP coming in at 6.8 percent year-on-year in the fourth quarter of 2016, and at 6.7 percent for the year, as reported by China Daily.

Chinas economic structure has also improved, with consumption accounting for approximately 65 percent of GDP in 2016, which has been accomplished thanks to the countrys move toward a consumption-driven growth mode.

However, China also faces such challenges as financial risks brought by high asset prices and large amounts of capital outflows as a result of the current U.S. interest rate and the strengthening dollar.

On Friday, the Peoples Bank of China raised short-term interest rates in a further sign of tightening policy as the economy shows more signs of stabilization.

Aside from local economic trends and market conditions, base oil producers and consumers continued to keep an eye on crude oil values.

Brent oil futures have been hovering above U.S. $55 per barrel over the last couple of weeks, but slipped below $57/bbl on Monday as a stronger dollar and abundant U.S. supplies outweighed OPEC output cuts and rising tensions between the U.S. and Iran.

ICE Brent Singapore April futures settled at $56.77 per barrel on Feb. 6, compared to $55.56/bbl on Jan. 26.

Furthermore, there continued to be numerous base oil suppliers who needed to improve margins, as these were crunched in the second half of 2016.

Some Northeast Asian producers were attempting to raise offers for spot cargoes for February and March shipment, and at the local level, suppliers continued to move up price indications as well.

It was heard that Taiwanese producer Formosa Petrochemical had initiated price increases for domestic transactions just before the start of the festive period.

The hikes called for upward adjustments on the producers list prices for February shipments of API Group II base oils. As a result, Formosas 70 neutral oil climbed less than one cent (in New Taiwan dollars) per liter.

Formosas domestic list price for the 150N cut edged up NT$ 18 cents per liter, while its 500N grade was heard to have increased by 97 cents per liter. There was speculation that the heftier hike for the heavy-viscosity grade was due to tighter conditions.

These increases follow two similar initiatives implemented by Formosa at the beginning of the year and in mid-January.

Sources also indicated that Formosa had increased the volumes of base oils being shipped for spot business into China in January compared to December, while maintaining its contractual commitments. A similar situation was expected in February.

Asian buyers and sellers resumed negotiations for February and March base stock shipments, but a clearer picture of where prices would be headed was not expected to emerge until next week.

Suppliers hoped for a strong showing in terms of demand levels, as downstream lubricant manufacturers were anticipated to start padding inventories ahead of the busy spring production season.

Base oil prices were generally said to be stable week on week as supply and demand were deemed well-balanced for most segments of the market, although the Group III tier continued to be weighed down by oversupply.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was unchanged at $600/t-$620/t, while the SN500 was heard at $690/t-$715/t and bright stock was steady at $925/t-$945/t.

The Group II 150 neutral was assessed at $600/t-$620/t, and 500N was holding at $775/t-$795/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was gauged at $490/t-$510/t, while the SN500 was heard at $600/t-$610/t FOB. Bright stock was hovering at $840/t-$870/t FOB.

Within the Group II category, 150N was heard at $510/t-$530/t, while 500N/600N was unchanged at $700/t-$720/t, all FOB Asia.

In the Group III segment, the 4 centiStoke and 6 cSt oils were assessed steady at $725/t-$755/t, and the 8 cSt grade was heard at $650/t-$670/t, all FOB Asia.

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

LNG Publishing shall not be liable for commercial decisions based on the contents of this report.