Asia Base Oil Price Report


Asia base oil suppliers are hoping the new year will usher in a change in market direction. December saw both demand and prices soften on account of a slight oversupply situation and a seasonal slowdown ahead of year-end inventory reviews.

The Asian market had already started to show some length in the last quarter of the year, as demand from downstream segments experienced a seasonal slowdown. The drive to reduce stocks ahead of December 31 because of tax implications prompted many suppliers to conduct spot sales, leading to a softening of base oil prices as sellers tried to entice buyers with attractive offers.

Sources acknowledged that December and some early January business had been finalized at decreases between $10 and $30 per ton from late November and early December prices, namely in Southeast Asia, where supply was outpacing demand.

A major Singapore refiner indicated it would lower its bright stock term prices to China by $30/t, effective Jan. 8, according to market sources. The refiner had lowered its ex-tank Singapore term prices for other API Group I and II cuts by $10-30/t in early December.

Similarly, buyers in Taiwan and China said that other suppliers had lowered their offers as well, but buyers were nevertheless generally cautious about acquiring product because of year-end inventory concerns.

In China, demand was said to have remained healthier than in other countries, but a slowdown was evident there as well.

Traders were heard to be holding quite a few cargoes in early December and appeared eager to sell. Buyers, aware of the pressure suppliers and traders were under, pushed for lower prices, and spot prices edged down.

Parcels of Group II 150 neutral were heard to be available in China at around $1,040/t FOB Asia, while 500N was mentioned near $1,090/t FOB Asia. These offers failed to attract many takers, however, as buyers bids were at least $20/t below these levels.

Given the prevailing downward pressure, prices in Asia were assessed as stable to soft last week on subdued trading. In the Group I segment, solvent neutral 150 was assessed at $920-$970/t, SN500 at $1,020-$1,050/t, and bright stock at $1,110-$1,160/t, all FOB Asia.

Group II material was assessed at $980-$1,040/t FOB Asia for 150N, and at $1,090-$1,140/t FOB Asia for 500N.

Group III prices were mentioned at $1,020-$1,070/t FOB Asia for 4 centiStoke and 6 cSt, and $1,000-$1,050/t FOB Asia for the 8 cSt cut.

Looking forward into January, there are opposing opinions about demand in China ahead of the Lunar New Year holidays celebrated from January 31 to February 6; some expect demand to dwindle because many downstream manufacturing facilities typically shut down operations during the spring festival. Others maintain that Chinese consumers will come back to the market in early January to replenish inventories, as stocks have been depleted in the run-up to the end of the year.

A Taiwanese supplier expects to ship at least 10,000 tons more of base oil to China in January compared to December, when the producer moved a total of 40,000 tons.

Imports of Russian base oils constitute another element that may play a role on Chinese Group I pricing in January. Trader sources said that a Russian supplier is expected to ship significantly higher amounts of Group I cuts to China in January as compared with December.

Meanwhile, some Northeast Asian suppliers are hoping that demand in India picks up in the coming weeks. Indian inventories have been on the lean side since September, when an acute Indian rupee depreciation prevented many buyers from securing imported spot base oil and limited their supply to contract cargoes and domestic availability.

The Indian economy was also expected to continue developing at a healthy rate, supporting growth in base oil consuming segments such as the automotive industry.

A Northeast Asian producer said it had already sold 6,000 to 7,000 tons of Group II cuts into India for January shipment at similar prices to those achieved in December, with the heavier grades having already been reduced by $10 to $20/t that month. The light-vis cuts for January shipment were being negotiated at a $10 to $20/t increase, the supplier said.

The seller had finalized December cargoes of 150N at $1,050-$1,060/t CFR Mumbai and 600N at $1,130 to $1,140/t CFR. The customers who lifted over 2,000 tons received a $30 to $40/t volume discount.

A number of suppliers expected prices of high viscosity grades to continue under downward pressure in Asia for some time, while low-vis cuts are currently in tight supply and facing slight upward pressure. The tightening is due to seasonal patterns, a producer explained, as the lighter grades see greater demand during the winter months.

A second supplier also expressed hopes that prices could be revised up by at least $10/t in January, but this remained to be seen.

Looking ahead, many sources expect few significant price changes in January, despite the fact that buying interest typically improves ahead of the Lunar New Year holidays at the end of the month. Buyers and sellers expect the market to be flush in 2014 due to scheduled additions to the global supply system. Those include 650,000 t/y Group II/III joint venture between Hyundai Oilbank and Shell in Daesan, South Korea, scheduled to start up in the second half of 2014, and a 200,000 t/y Group II expansion at Sinopec Maoming in Guangdong, China.

Producers underscored that margins currently are thin, while crude oil and feedstock fuel oil and gas oil prices remain high. As a result, several base oil manufacturers mulled possible production cutbacks to attain a more balanced base oil market scenario, avoid selling at a loss, and prevent further price erosion.

Upstream, February 2014 ICE Brent Singapore futures were trading at $112.42 per barrel during the Asian trading day on December 30, compared with numbers at $111.84 per barrel on December 23.

Gabriela Wheeler, based in Japan, can be reached directly at

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