Asia Base Oil Price Report


With healthy demand and firm crude oil and feedstock costs continuing to exert upward pressure on base oil prices in Asia, it appears that prices are poised to move up.

A major Singapore refiner was heard to be intending to raise ex-tank Singapore API Group I and II term prices by U.S. $20/ton on April 19, according to market sources. Group II 500 neutral grade, however, would remain intact.

Other producers have also raised price indications by $20-30/ton for April and May shipments, but the higher numbers are not well-established yet, with only deals involving Group I light-viscosity grades heard to have inched up by the target amounts in April.

Despite a pick-up in requirements over the last two to three weeks, base oil availability is still fairly plentiful, and no major plant turnarounds are scheduled in the short term, leaving buyers with the feeling that there is no urge to secure volumes at the higher price levels.

As a result, pushing increases through has been an uphill battle, according to suppliers. In some cases, moderate increases have been achieved, but they are still not enough to offset high production costs and improve margins, producers emphasized.

In fact, prices of the heavy-vis cuts within the Group II segment have actually weakened, so suppliers have turned to the export market to place products such as 500N. At least one cargo was reported to have been concluded from South Korea to the U.S., where prices have been edging up. This is the first time since mid-2013 that an Asian Group II cargo has moved to the U.S. as the arbitrage window has been so far closed, according to sources.

A Taiwanese Group II producer is currently discussing May term shipments and expects strong demand from its term customers, leaving little product available for spot shipments, although negotiations are not anticipated to wrap up until next week.

In China, there are signs that the economy was not as strong as expected during the first quarter. The gross domestic product (GDP) was forecast to have grown by 7.3 percent compared with the first quarter a year ago, and this figure is below the official target of 7.5 percent. China recorded a yearly GDP growth of 7.7 percent in the last two years.

A slowing economy has resulted in a cautious attitude towards purchases, with the smaller base oil consumers acquiring limited volumes as they prefer not to carry large inventories in case demand from downstream segments stalls, and prices soften in coming months.

This situation, together with a slightly oversupplied base oils market, had led to a decline in the Chinese domestic prices during the first quarter of the year, particularly in the API Group II segment, sources said.

However, the trend appears to have reversed over the last few weeks, as requirements have shown an improvement given the stepped-up activity within the downstream lubricants industry. Furthermore, lubricant manufacturers favor the high-viscosity grades for spring/summer formulations and this segment of the market is anticipated to see a revival.

Availability of most products should not be a problem, sources said, as regional producers have increased production of the heavy-viscosity grades since last November because they could obtain better margins than for the lighter grades. Nonetheless, bright stock is expected to remain fairly tight, as demand continues to be healthy amid declining inventories.

Several plants will be coming back on stream, or increasing output in China, as well as in Thailand, in April and May, helping keep supply/demand more balanced.

Panjin Northern Asphalt is expected to restart its 400,000 ton-per-year Group II plant in Liaoning in late April/early May, following a twenty-day turnaround.

Sources said that Shandong Qisheng will also be restarting its 70,000 t/y Group I plant in Shandong in May, after the unit completes an overhaul. The plant has been experiencing production issues since last November.

Sinopec Jingmen is expected to restart its 100,000 t/y Group II base oils plant in Hubei in late April, too.

Hainan Handi Sunshine was heard to have increased operating rates at its Group II facility in Hainan after running at reduced capacity since late last year.

In Thailand, Integrated Refinery & Petrochemicals Complex (IRPC) is anticipated to restart its 320,000 t/y Group I plant in Rayong next week, following a turnaround which commenced in mid-March, according to sources.

Despite intended price increases looming, this week prices were assessed as mostly stable in Asia.

On an ex-tank Singapore basis, prices were holding at $1,040-$1,090/t for Group I solvent neutral 150. The SN500 grade was heard at $1,060-$1,120/t, while bright stock was reported at $1,170-$1,240/t.

On an FOB Asia basis, Group I solvent neutral 150 was steady at $950-$980/t FOB Asia. SN500 was heard at $1,030-$1,070/t, and bright stock at $1,150-$1,210/t, all FOB Asia.

Group II 150 neutral was mentioned at $1,010-$1,050/t FOB Asia, while 500N was transacted at $1,050-$1,100/t FOB Asia.

In the Group III segment, 4 centiStoke and 6 cSt oils were discussed at $1,030-$1,080/t FOB Asia, and the 8 cSt grade was heard at $1,020-$1,050/t FOB Asia.

On the shipping front, a number of cargoes were being discussed from South Korea to different destinations in Asia and the Middle East. A 4,000-metric ton cargo of two base oil grades was on the table from Ulsan or Yeosu to Mesaieed, Qatar, for second half April lifting and delivery after May 15. A 1,000-ton lot was expected to be shipped from Ulsan to Hong Kong and Zhuhai, China, during May 3-7. A 1,000-ton parcel was quoted for Yeosu to Tianjin, China, for April 20-24 shipment.

Additionally, a 2,700-ton cargo was likely to be shipped from Hong Kong to Yokohama, Japan, during May 3-7. A 1,750-ton lot of bright stock was being worked on for Sriracha, Thailand, to Jiangyin, China, for mid-April lifting. A second 2,000-ton parcel was on the table for Thailand to China for second half April shipment.

Upstream, May ICE Brent Singapore futures were trading at $108.13 per barrel in afternoon trading April 14, compared with numbers at $105.49/bbl on April 7.

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