A fire halted base oil production at Thailands Integrated Refinery Petrochemical Complex refinery in Rayong last week, triggering worries that API Group I cargoes in Southeast Asia could be curtailed.
The fire started in the evening of June 9 at the refinerys vacuum gas oil hydrotreater and was extinguished in about two hours, according to media reports. There were no injuries, and damage was limited to the hydrotreater, IRPC said. The refinery processes 215,000 barrels per day of crude oil, and the base oil unit has a capacity of 320,000 metric tons per year.
Market sources expected the accident to impact IRPCs ability to supply base oils, as the hydrotreater will likely be shut down for repairs for approximately three months and this will affect the companys vacuum gas oil (VGO) output, although there was no confirmation from the producer. IRPCs base stock spot availability was anticipated to be limited to non-existent during the outage, sources added.
The incident comes on the back of ongoing political and social unrest in Thailand, where the military staged a coup last month, resulting in the overthrow of Prime Minister Yingluck Shinawatra.
Meanwhile, Asian base oil market players were following developments on the pricing front closely, as reports that a major refiner would be increasing prices for its low-viscosity grades started to circulate the market this week.
According to sources, the producer communicated its intention of lifting ex-tank Singapore list prices for its Group I solvent neutral 150 and Group II 150 neutral by $20 per metric ton on June 26, according to sources. There was no increase announced for the heavy-vis grades so far, as supply of these cuts was said to be plentiful, while the light grades have seen some tightening over the last few months. Furthermore, margins on the light-vis cuts have experienced the most erosion since last year, sources added.
There had been expectations that the refiner would be revising its prices to Asian customers after it moved values up in the U.S. and Europe in recent weeks, although sources felt that the supply/demand balance in Asia has not been as tight as in other regions. The production problems in Thailand, together with persistently high production costs, may have driven the producer to seek the price increases, sources conjectured.
Most producers in Asia have been trying to push price increases through since the first quarter, but adequate availability, together with an absence of severe production problems and a light turnaround schedule in the region undermined suppliers efforts.
An expected slowdown in demand during the summer months was also dampening producers hopes of achieving price increases. Most suppliers reported that demand remained generally steady, but that orders from some term customers had seen a slight decrease, particularly for Group I and II oils. A Group III supplier said that volumes sold under contract had not seen much fluctuation in June compared to May.
In China and Taiwan, activity has slowly started to pick up the pace, following the celebration of the Dragon Boat Festival. Likewise, trading is reviving in South Korea as participants are returning to business following the Memorial Day holiday last week. Sellers are seeing small requirements for spot cargoes, but buyers are unwilling to accept current offer levels, as availability of most grades is not a problem.
Prices in Asia experienced few changes this week, with indications assessed as stable from the previous week.
On an ex-tank Singapore basis, Group I prices were steady at $1,060-$1,100/t for solvent neutral 150. SN500 oils were unchanged at $1,080-$1,130/t, and bright stock at $1,190-$1,250/t. These prices will be revised, once the increase announced by a major refiner becomes effective later this month as mentioned above.
On an FOB Asia basis, Group I SN150 was assessed at $950-$980/t FOB. SN500 was heard at $1,040-$1,070/t FOB and bright stock was mentioned at $1,190-$1,220/t FOB.
Group II 150 neutral was heard at $1,010-$1,050/t FOB Asia, while 500N was steady at $1,050-$1,080/t FOB Asia.
In the Group III segment, 4 centiStoke and 6 cSt oils were stable 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, several base oil inquiries popped up in the earlier part of the week, but discussions ebbed as the week wore on.
Three cargoes were still on the table to be shipped from Kainan, Japan. A 1,500-cargo was expected to move to Busan, South Korea, on July 15-20; a 2,000 or 3,500-ton lot was likely to be shipped to Singapore on June 25-July 5, and a third 1,500-ton cargo was going to Hong Kong in mid to late June. Also in Japan, a 2,500-ton lot was being discussed from Mizushima to Busan, South Korea, for July 15-20 lifting.
A 1,500-ton cargo was being worked on for Ulsan, South Korea, to Gebze, Turkey, for June 20-July 15 shipment.
A 3,000 to 5,000-ton parcel was expected to cover Jakarta, Indonesia, to Nantong, China, in mid June. Finally, a 3,000-ton cargo was also being discussed from Batumi, Georgia, to Mumbai, India, for June shipment.
Upstream, July ICE Brent Singapore futures were trading at $112.87 per barrel in afternoon trading June 17, compared with numbers at $109.13/bbl on June 9.