Buyers in Asia are hoping that weakening crude oil values, together with prospects of improved supply, would bring base oil prices down in October.
While activity was generally subdued during the week given holidays in China, Taiwan, South Korea and Japan, suppliers expected orders to pick up in the next few weeks, as many finished lubricant producers are preparing for the busy winter oil change season.
However, the National Day holidays celebrated in China Oct. 1-7 were anticipated to bring a temporary slowdown in demand, because buyers and sellers typically tend to reduce their market participation for several days before and after the holidays.
The slowdown was expected to be partly offset by reduced production at a number of Chinese base oil facilities.
Sources heard that Sinopec Shanghai Gaoqiaos Group I and II base oils plant had been shut down late last week, following a power outage. The unit was anticipated to be down for several days, as the restart process usually takes time, sources said.
Sinopec was also understood to have scheduled a 50-day shutdown at its Group I plant in Maoming in October.
Handi Sunshine Petrochemicals Group II plant in Hainan remains off-line as well, but is expected to restart in late September, while Daqing Refining was expected to resume production at its Group II base oils plant in Daqing around Sept. 20, following a turnaround, local sources said.
Recently released economic data about China was also looking slightly more positive than in previous months, feeding a more optimistic outlook on the part of the end-users, a supplier said. This could lead to improved demand once the holidays are over.
Meanwhile, Asian consumers were eagerly awaiting the imminent restart of Formosas Group II base oils plant in Mailiao at the end of the month, as the additional availability was expected to help bring base oil prices down. However, the impact of the restart was not likely to be evident right away, given that the producer would not be able to participate in the spot market for some time, sources explained.
The heavy-vis cuts continue to be in high demand, with a Northeast Asian supplier having received several inquiries in the last week, particularly for the 600N cut. However, the supplier said it did not have much spot availability of the heavier cuts, given the healthy requirements.
A second Northeast Asian supplier said that orders for October shipments of Group II material were within forecast levels, and that no Group III cargoes were available for spot business after fulfilling term customers requirements. The supplier expected to see little fluctuation in terms of pricing in October.
Prices have remained on a steady course over the last couple of weeks, buyers and sellers agreed, despite continuing efforts on the part of suppliers to improve margins by moving offers up. Prices edged up slightly in early September–catapulted by rising crude oil and feedstock prices and tight conditions for most grades–but have been fairly stable since then.
For the time being, Group I SN150 was holding at $930-$970/t FOB Asia, SN500 at $1045-$1080/t FOB, and bright stock at $1145-$1190/t FOB.
Group II material was mentioned at $1000-$1050/t FOB Northeast Asia for 150N, and at $1100-$1160/t FOB Northeast Asia for 500N.
Group III cuts were heard within a price range of $1040-$1080/t FOB Asia for 4 centiStoke and 6 cSt. The 8 cSt cut was gauged at $1020-$1060/t FOB Asia.
On an ex-tank Singapore basis, Group I prices were pegged near $1000-$1090/t for SN150; SN500 was assessed at $1090-$1190/t, and bright stock was heard at $1190-$1290/t. Prices varied according to volumes, producer and contract stipulations.
On the shipping front, several fresh inquiries emerged during the week. A 1,300-metric ton parcel of base oil was being worked on to cover Onsan to Taicang on a prompt basis. A 5,000-ton cargo was expected to ship from Kainan to Hong Kong and Singapore, also on a prompt basis. A 1,500-ton lot was likely to cover Rayong to Dalian in late September. A 500-ton parcel was on the market for Yosu or Ulsan to Taichung for shipment during Sept. 24-30, while a second 1,000-ton lot was being discussed for Onsan to Haiphong during Oct. 10-18. There were also discussions for a combination 4,000 to 5,000-ton cargo of two or three base oil grades for Mailiao to Mumbai for lifting during Oct. 20-25.
In related news, typhoon Usagi was heard to have caused the closure of the port of Hong Kong, as well as forced evacuations in southern Taiwan over the weekend.
Upstream, November ICE Brent Singapore futures were trading at $108.17/bbl at the close of the Asian trading day on Sept. 24, compared with numbers at $109.60/bbl on Sept. 17.
Gabriela Wheeler, based in Japan, can be reached directly at Gabriela@LNGpublishing.com.