Asia Base Oil Price Report


Asian base oil producers latest thrusts to increase prices and improve margins have seen resistance from buyers who feel comfortable about the current supply situation.

The market is fairly well-supplied, has few turnarounds planned in the near term, and hasnt seen a sharp increase in demand – factors that are roadblocks to potential price hikes, suppliers explained.

Some in the industry are watching to see if movement comes from a major Singapore refiner, because the producer has hiked prices in the United States and Europe, but the suppliers intentions werent clear.

A Northeast Asian producer said upticks in spring demand and prices had not been as strong as in previous years, and price initiatives had been difficult to implement. Requirements from China, for example, were said to be less robust than expected, and buyers appetite in Southeast Asia had been somewhat subdued, although demand for heavy viscosity grades has started to pick up.

Northeast Asian suppliers said they received several inquiries for API Group II 500 neutral, for example, as blenders are using the heavier cuts in their summer formulations. Within Group I, solvent neutral 500 and bright stock have also seen a revival in demand, with spot deals being discussed closer to the high end of prevailing price ranges.

One supplier said it was in negotiations for spot shipments of SN500 and bright stock and that offers were hovering close to U.S. $1,050-1,070 per metric ton FOB Asia for the SN500 and at around $1,220/t FOB for bright stock. The supplier doubted that any bright stock could be obtained below $1,200/t FOB Asia this week, adding that it had very limited spot availability of heavy grades.

Perhaps the uptick in Group I demand in Southeast Asia can be attributed to a possible turnaround at Thai Lubes Group I plant in Sriracha in July, although this information could not be confirmed with the producer directly. The plant has a capacity to make 280,000 tons per year of base oils. Political upheaval and a military coup in Thailand were expected to affect the countrys chemical and industrial operations over the next few weeks.

It was also heard that an Indonesian Group I supplier would be shipping several spot cargoes to China in May, but that the quantities were similar to those moved in April because demand had not increased significantly.

Also in the Group I segment, JX Nippon Oil was understood to be preparing to shut down its two base oil units in Mizushima. The larger, 250,000 t/y unit is expected to be taken off-line in late May for an extended turnaround that could last up to 90 days, according to sources, while the smaller, 170,000-t/y line is scheduled for a month-long turnaround.

Other Group I suppliers had hoped for an opportunity to secure additional business from customers that may not be able to source enough product from JX Nippon during the outage, but some were surprised to find that there were no fresh requirements linked to the turnaround. There was speculation that buyers built up inventories in the first quarter of the year, ahead of a sales tax increase in Japan in April, causing a subsequent dwindling of base oil demand. Also, Japanese suppliers were expected to fill some of the gap in domestic requirements.

Meanwhile, Asian Group II and III suppliers breathed a sigh of relief at news that Takreer would be once again delaying the start-up of its new 600,000 t/y plant in Ruwais, United Arab Emirates. The plant will produce up to 100,000 t/y of Group II and 500,000 t/y Group III oils, and a majority of production from the plant is earmarked for Asian markets, which are already slightly oversupplied.

The unit was originally expected to commence production in December 2013, but the date was delayed to June 2014 and is now pushed back to the fourth quarter, although there is a possibility that it might not start up until next year, according to sources. Takreer, which is wholly owned by Abu Dhabi National Oil Co. (Adnoc), is conducting precommissioning trials to make the necessary adjustments for a start-up, the sources added. Takreers product was originally going to be marketed by Finnish refiner and marketer Neste, but negotiations between the two companies broke down in September 2013.

Base oil pricing was generally stable to firm in Asia, with the lower end of some grades moving up this week.

On an ex-tank Singapore basis, Group I prices were holding at $1,060-$1,100/t for SN150. 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. SN500 edged up to $1,040-$1,070/t FOB, reflecting a $10/t upward adjustment at the low end of the range. Bright stock was assessed at $1,190-$1,220/t FOB, showing a $20/t increase at the bottom end of the spread on reports that bids and offer levels have climbed.

Group II 150 neutral was heard at $1,010-$1,050/t FOB Asia, while 500N was stable at $1,050-$1,080/t FOB Asia.

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

On the shipping front, a 5,000-metric ton cargo of 600N was still on the table for Ulsan or Yeosu, South Korea, to Antwerp, Belgium, for late May-10 June lifting. A second 500-ton parcel of 600N was on the table for Yeosu to Taichung, Taiwan, for May 20-29 shipment. A 3,500-ton lot of four grades was expected to be shipped from Yeosu to Merak, Indonesia, on June 15-25. Finally, a 2,000-ton cargo was being worked on from Cilacap, Indonesia, to Nantong, China, for May 29-June 5 lifting.

Upstream, July ICE Brent Singapore futures were trading at $110.05 per barrel in afternoon trading May 26, compared with numbers at $109.94/bbl on May 19.

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