Demand then starts to pick up in late February and March, when lubricant producers prepare inventories for the busier spring production cycle.

However, this year, conditions are slightly atypical in that the Lunar New Year is falling earlier than usual at the end of January–instead of later in February–while both buyers and suppliers have started the year with fairly lean inventories.

With the Lunar New Year looming and participants in China and several other countries preparing to slow down, or even suspend production during the week-long celebration starting on January 28, there has been keen interest to conclude deals before the holiday.

This was partly attributed to concerns that base oil prices may continue to move up, ending at much higher levels after players return to the market in early February.

Another driver appears to be the possibility of a tighter supply scenario during the first half of the year on the back of possible plant turnarounds in the region.

While several sources mentioned potential production outages, it was not possible to confirm which plants may be going into a turnaround in Q1, but many facilities undergo maintenance every two years and there are a few that are due for a turnaround. This includes some facilities in China and Japan.

Several producers have also entered the year with low inventories because of output cuts in 2016 and the heavy use of in-house produced base stock for their own downstream operations during Q4.

As a result, participants reported limited volumes of spot product available for January and February shipment, particularly as far as the heavy-viscosity grades within the API Group II category were concerned.

Suppliers have consequently upped their offers on the Group II 500/600 neutral, with numbers heard to have climbed U.S. dollars $30-40 per metric ton, although there were cases where sellers were unable to offer any product because of lack of spot availability.

The heavy-vis cuts within the Group I segment have also inched up because of a snug supply and demand balance. The solvent neutral 500 grade moved up $10/t week on week, but has been steadily showing gains over the last couple of weeks.

Bright stock experienced the most upward movement, with numbers jumping by $40-60/t and some offers heard above $870/t FOB Asia.

While some countries such as India are able to source competitively-priced product from Middle Eastern origins such as Iran, indications from these suppliers have also edged up due to the rise in crude oil costs, narrowing the difference with prices from local producers.

Market discussions in Asia were said to have picked up in the last few days, but the lack of readily available cargoes put a damper on the conclusion of business. Spot prices were assessed stable to firm on higher bids and offers heard during the week.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was notionally assessed up by $10/t at $600/t-$620/t, while the SN500 was up by $20/t at $690/t-$715/t. Bright stock moved up by $10/t to $925/t-$945/t.

The Group II 150 neutral was also adjusted up by $10/t to $600/t-$620/t, and 500N edged up by $10/t to $775/t-$795/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was revised up by $10/t to $480/t-$500/t, while the SN500 was also up by $10/t to $590/t-$600/t FOB. Bright stock was up by $40-60/t at $840/t-$870/t FOB on higher discussions.

Within the Group II category, 150N was higher by $10/t at $500/t-$520/t, while 500N/600N was up by $40/t at $690/t-$710/t, all FOB Asia.

In the Group III segment, prices remained largely unchanged, with the 4 centiStoke and 6 cSt oils holding at $725/t-$755/t, and the 8 cSt grade assessed at $650/t-$670/t, all FOB Asia.

Meanwhile, crude oil prices continued to occupy a prominent spot on participants’ minds.

While Brent futures continued to hover well above $55 per barrel, numbers received support during the week from trader expectations that key OPEC members would be curbing production as agreed last November, and that demand in China would show continued growth this year.

However, there was still concern about a possible increase of shale oil production in the U.S. as crude prices move up, which could add to the supply glut that has been plaguing the system for the last two years.

ICE Brent Singapore March futures settled at $55.34 per barrel on Jan. 16, compared to $56.81/bbl on Jan. 9.

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.