Asia Base Oil Price Report

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Base oil trading was somewhat subdued in Asia, as players arent concluding May business until a clearer price picture emerges.

Producers continue to hope for price increases in May, given steep crude oil and feedstock costs, together with heightened buying activity during the spring season.

Buyers, on the other hand, have been reluctant to accept any price adjustments, explaining that demand from downstream segments has not been as strong as expected, and that base oil price hikes are difficult to transfer down the supply chain.

Most producers have not yet communicated formal offers for May spot shipments, as they are still assessing the market and their competitors activity first.

A buyer said that it had unsuccessfully tried to secure a May cargo, adding that producers have not given me a quotation yet as they are likely contemplating price revisions.

Talk that suppliers would be seeking increases of U.S. $20 to $30 per metric ton for May base oil shipments emerged on the back of reports that a major Singapore refiner would be raising ex-tank Singapore API Group I and II term prices by U.S. $20/ton on April 19, market sources said. This could not be directly confirmed with the producer. The Group II 500 neutral grade would be the only cut that would remain unchanged, sources added.

Buyers do not seem to be in a hurry to jump at the first proposal they receive, and are gauging the most competitive offers. Many are hoping to see prices roll over from April, although a few said that they would not be surprised if prices moved up as production costs remain high and base stock prices have already strengthened in other regions such as Europe and the U.S.

Taiwanese buyers, for example, are waiting to hear what local suppliers will be quoting for next months shipments, before deciding whether imported product might be more competitive.

Most base oil grades are available, although the Group I heavy-viscosity cuts have tightened, with bright stock said to be particularly snug. In fact, spot prices of the light-vis Group I cuts have moved up in recent weeks, closing the gap with values of Group II light-vis material, sources said. This was partly the result of recent and ongoing turnarounds in China and Thailand.

Thai producer Integrated Refinery & Petrochemicals Complex (IRPC) was heard to have restarted its 320,000 metric ton per year Group I plant in Rayong this week, following a turnaround which started in mid-March, according to buyers. The producer has been unable to offer any spot tonnage into China during March and April as it was focusing on meeting term contracts.

In China, Group I base oils supply is still very tight, as Dalian Petrochemical has shut its 450,000 t/y Group I plant in Dalian for a turnaround this month, sources said.

Additionally, the restart of PetroChinas Fushun Group I base oil plant has been postponed to mid-April.

Meanwhile, Group II producers Panjin Northern Asphalt and Sinopec Jingmen are expected to bring their base oil plants back on stream in late April, following maintenance shutdowns.

Suppliers said it was difficult to predict when May business would be finalized, but expected protracted negotiations, with transactions possibly concluded at the end of April, or early May.

As a result of the stand-off between buyers and sellers, very few fresh transactions were finalized during the week, with prices assessed mostly stable on an FOB Asia basis, and higher on an ex-tank Singapore basis, given a major producers price initiatives.

Prices within the Group III segment have been particularly stagnant over the last several weeks, likely because supply is adequate, sources said.

On an ex-tank Singapore basis, Group I prices were assessed at $1,060-$1,100/t for Group I solvent neutral 150. The SN500 grade was heard at $1,080-$1,130/t, while bright stock was reported at $1,190-$1,250/t; the ranges reflect a $10-20/ton upward revision.

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

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

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

In Pakistan, media reports indicate that producer National Refinery has increased the price of Group I base oils by Pakistani rupees (PKR) 2 per liter (1.00 PKR = U.S. $0.0103), which buyers said would likely lead to sharp increases in lubricating oil prices. This is the second increase sought by the supplier in less than a month and the fifth hike in four months, the reports said. Finished lubes prices are hovering near two-year highs in Pakistan, according to market participants.

On the shipping front, several cargoes were on the table from South Korea to different Asian ports, with a 1,000-metric ton cargo being quoted from Onsan to Tianjin, China, for May 4-8 lifting. A second 1,000-ton lot of 220N was expected to cover Yosu to Tianjin during April 20-24, while a third 1,000-ton parcel was being worked on from Ulsan to Hong Kong and Zhuhai, China, for May 3-7 shipment. A 3,000-ton cargo was being discussed for Ho Chi Minh and Vung Tau, Vietnam, during May 1-10.

There was also a large 7,000-ton lot on the table for Dumai, Indonesia, to Ulsan for early May shipment. A 1,750-ton parcel of bright stock was expected to cover Sriracha, Thailand to Jiangyin, China in mid-April. A 2,700-ton cargo was expected to be shipped from Hong Kong to Yokohama, Japan, during May 3-7, and a 2,000-ton lot was being discussed for Karachi, Pakistan to Hamriyah, United Arab Emirates, for April 24-25 lifting.

Upstream, June ICE Brent Singapore futures were trading at $109.13 per barrel in afternoon trading April 21, compared with numbers at $108.13/bbl for May futures on April 14.

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