Base oil prices were generally stable, but activity slowed down because of the Golden Week and Labor Day holidays widely observed in Asia at the beginning of May.
Prices in Asia have remained flat over the past few weeks, despite producers continued attempts to implement increases. It appears that Asian buyers are not receptive to the higher indications, because they perceive the market to be adequately supplied.
A Northeast Asian producer said that it had faced strong resistance to attempted increases. Buyers are comfortable and not desperate to get product, the supplier said, appearing resigned to maintaining April prices on May transactions.
Other suppliers concurred that it had been difficult to up prices, and expected few changes in the coming weeks, despite the fact that spring is typically the time when prices edge up on account of increased demand.
With the exception of JX Nippon Oils turnaround in May, there are few plant outages anticipated over the next few months, and several of the units that are currently undergoing maintenance will be brought back on stream shortly. As a result, buyers do not expect major problems securing the product they need, sources commented.
JX Nippon Oil is preparing to shut down the larger of its two API Group I base oil plants in Mizushima for about two months. The plant has capacity of 250,000 t/y. The smaller unit, which produces 170,000 t/y, will be taken off line for thirty days, market sources said, although no producer confirmation was forthcoming.
While the light-viscosity grades are still described as snug, the supply balance could be shifting, with the heavy-vis side anticipated to become tighter over the next few weeks with the arrival of warmer temperatures and increased requirements.
Buyers typically start changing their formulations to include heavier base oils for the summer, and this should result in a tighter supply/demand ratio for these cuts, while availability of the lighter grades was expected to improve.
Base oil producers said that there were no plans to change the current slate of products being manufactured, and that despite the expected pick-up in demand for the high-vis grades, they would not be increasing the output of these grades in detriment of the lighter cuts.
In fact, suppliers were hoping that current heavy oil inventories would start to be drawn down, as some sellers are holding hefty stocks at the moment.
One refiner was heard to have trimmed its Group II heavy-vis oil prices to term customers for May cargoes shipped out of its Singapore facilities, possibly hoping to stimulate sales of the product. The 500 neutral cut was understood to have been lowered by U.S. $20 per metric ton, according to market sources.
Industry participants also said that many spot parcels of base oils had been moving to China over the past weeks, as demand remains healthy, especially for the light-viscosity grades.
Spot availability of imports was expected to increase in China in May as a Taiwanese Group II producer has concluded a number of spot deals involving 150N and 500N cuts. The supplier had only been able to ship cargoes to term customers in April and had not entertained any spot business.
A Group III supplier appeared disappointed that the market was rather stagnant, despite expectations of a pick-up in demand during the spring production season. This may be partly attributed to the plentiful availability of Group III oils in the region, as capacity appears to be growing at a higher rate than demand.
However, some analysts remain optimistic that as the industry moves towards stricter fuel economy and emissions standards, Group III cuts will see a wider acceptance in the Asian markets. Demand for imports of Group III material in China will remain strong as additional production capacity is not expected to increase substantially in the next couple of years, given technical limitations.
Since trading was rather thin during the week, spot prices were largely unchanged.
On an ex-tank Singapore basis, Group I prices were heard at $1,060-$1,100/t for solvent neutral 150. SN500 oils were reported at $1,080-$1,130/t, and bright stock at $1,190-$1,250/t.
On an FOB Asia basis, Group I SN150 was steady at $950-$980/t FOB Asia week on week. SN500 was unchanged at $1,030-$1,070/t, and bright stock at $1,150-$1,210/t, all FOB Asia.
Group II 150N was reported at $1,010-$1,050/t FOB Asia, while 500N was assessed at $1,050-$1,080/t FOB Asia.
In the Group III segment, 4 centiStoke and 6 cSt oils were mentioned 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, only a handful of inquiries emerged because of the absence of traders and ship operators during the holiday period. A 2,500-4,000 metric ton parcel of base oil was on the table for Negishi, Japan, to Singapore for end of May/early June shipment. A number of cargoes were expected to be shipped from South Korea, including a 3,300-ton lot made up of four grades loading in Yeosu to Merak, Indonesia, on May 20-30, and an 8,400-ton cargo of three grades from Yeosu to Sharjah, United Arab Emirates, for second half May lifting. Finally, a 5,000-ton cargo of 600N was still being discussed for Yeosu or Ulsan to Antwerp, Belgium, for May 20-30 shipment.
Upstream, June ICE Brent Singapore futures were trading at $108.67 per barrel in afternoon trading May 5, compared with numbers at $110.07/bbl on April 28.