The Chinese government said that economic growth must be controlled to avoid overheating of the economy with strong inflation as an unwanted result. Reserve requirements for Chinese banks were raised to slow down lending activity. New housing market numbers in the US were also less positive then expected which made investors doubt the strength of the economic recovery. Crude prices fell from a high of USD 83 (WTI) in the first week of 2010 to USD 73 by the end of January.    

January started slowly for base oil markets after the Christmas and New year festivities. Base oil prices remain stable around the world. At the end of the month interest arose for trades to India and Far East.

The European market was in a stand-off. Some refineries reduced operating rates by 70% in order to prevent base oil prices from falling further. Since higher base oil prices were required in order to cover cost of production the incentive to produce was weak. Demand also remained weak. Some spot trades were heard from Agip, (Livorno, Italy) and Galpenergia (Leixoes, Portugal) to Brazil for ICIS FOB Europe prices with a premium for shipment in February. Rumors were that the buyer was Petrobas, however this was not confirmed.

The Asian market remained stable with a slight increase for SN500. In China interest from buyers was generated through stocking up their inventories before the Lunar holiday. Petrochina and Sinopec have increased their domestic prices slightly with USD 8-15 per metric ton. In the spot market Iranian cargo for SN500 was offered for USD 790,-/mt CFR China. But no deals were heard of. In Taiwan, Formosa’s Group II refinery has restarted their production after a shutdown due to technical difficulties in December.

In the South East region markets remain around the same numbers. In Malaysia a 9000 mt cargo of Iranian base oil (SN500), which arrived early December, remained unsold.  Pertamina’s base oil refinery at Cilicap had an explosion in the end January. The refinery was shutdown temporarily.
The market in India remains quiet, due to surplus of inventories. Russian base oils were offered in this region at US 760.-/mt CFR Mumbai for SN500.

Despite of the lower crude prices some refineries in the U.S., like Valero, increased their domestic prices. In general the balance between supply- and demand remained steady.