Asia Base Oil Price Report


Sluggish demand and ample availability have led to further downward price adjustments in the Asia base oils market this week.

A major Southeast Asian producer has reduced its API Group II list prices for a second time since the beginning of the month, and the two consecutive price movements highlight just how strong the current downward pressure is on pricing, sources said.

The producer was heard to have adjusted its ex-tank Singapore 150 neutral grade down by $30 per metric ton, while its 500N was lowered by $40/ton, effective Sept. 19.

The supplier had previously reduced the price of its 150N grade by $35/ton, while its 500N cut was dropped $40/t, with the reductions having become effective on Sept. 5.

The refiner has announced plans of expanding Group II capacity at its Singapore plant in 2015, and some sources speculated that it had revised prices in order to lay the groundwork for its marketing strategy, but this could not be corroborated.

A producer in Taiwan has also dropped domestic list prices for September shipments, hoping to foster business in a thinly traded market.

The supplier was forced to trim the base stock volumes shipped under contract to China given lackluster demand in that country during September, and prospects for October shipments were not very encouraging, sources commented.

A number of producers in the region have also resorted to slashing operating rates, while others have embarked on maintenance shutdowns to avoid a build-up of inventories.

Buying apetite in Asia has been subdued since the beginning of the summer, and suppliers had been entertaining hopes that demand would pick up ahead of the fall/winter season, when blenders prepare inventories and change formulations for the last burst of activity before the end of the year.

Bright stock prices had actually experienced increases mid-year, when values for other Group I high viscosity cuts such as SN500 were waning due to competition with comparable Group II cuts.

This phenomenon was mostly attributed to the fact that bright stock cannot be easily substituted with other base oils, and that the bright stock supply/demand ratio in Asia has remained tight since January.

Furthermore, concerns over a possible shortage of bright stock were fueled by the imminent closure of the CPC-Shell Group I facility in Kaohsiung, Taiwan, which is expected to occur before the end of the year.

Bright stock prices were hovering at $1,110-$1,160/t FOB Asia in mid Jan., then registered highs around $1,170-$1,190/t FOB in late Aug., and slid to $1,165-1,185/t FOB by mid Sept.

In India, bright stock was heard to have dropped by $30-35/ton in September versus August.

Also within the Group I segment, Indonesian producer Pertamina has awarded a tender for a total of 7,500 tons of late September cargoes made up of SN130 and bright stock. The tender closed on 16 Sept.

According to sources, the SN130 fetched a price of around $1,040/ton CFR Northeast Asia, while the bright stock was mentioned at around $1,275/ton CFR, but this could not be confirmed with the seller. The producer had issued a similar tender in August, and another one for a larger quantity in early September, but both were eventually cancelled.

There were also reports that Pertamina was planning to shut down its base oil plant for a one-month turnaround at the end of September.

As far as pricing in Asia is concerned, although the number of confirmed transactions remained low, the price ranges shown below have been notionally adjusted down to reflect market sentiment and the direction prices are moving.

On an ex-tank Singapore basis, Group I solvent neutral 150 were holding at $1,070-$1,120/t and SN500 at $1,060-$1,120/t. Bright stock was assessed at $1,215-$1,265/t, reflecting a $5/t drop from the previous week.

On an FOB Asia basis, Group I SN150 was mentioned at $980-$1,010/t FOB, while SN500 was heard at $990-$1,020/t FOB. Bright stock prices were assessed at $1,165-$1,185/t FOB, showing a $5/ton decrease.

Within the Group II segment, prices for 150 neutrals were largely unchanged at $1,000-$1,020/t FOB Asia, while 500N was heard at $1,010-$1,030/t FOB Asia.

There was some pressure on Group III pricing given plentiful supply, with prices of 4 centiStoke and 6 cSt oils assessed at $1,030-$1,070/t FOB Asia, reflecting a $10/ton drop. The 8 cSt grade was heard at $1,010-$1,040/t FOB Asia, revealing a $10/ton decrease at the low end of the range.

On the shipping front, discussions centered on a few base oil cargoes expected to be shipped from Japan and South Korea in October. A 2,500-3,000-metric ton lot was on the table from Kainan and/or Mizushima, Japan, to Malacca, Malaysia, for Oct. 10-15 shipment. A second 3,500-4,000-ton parcel was being worked on for Kainan/Mizushima to Manila and Ho Chi Minh for Oct. 15-19 lifting.

In South Korea, a 7,700-ton cargo was expected to be shipped from Yeosu to Sharjah, United Arab Emirates, in Oct. A 1,000-ton lot was being quoted for Yeosu to Maoming or Nansha, China, for Oct. 10-14 shipment. A 2,000-ton parcel was under discussion for Onsan to Tianjin, China, for Oct. 4-8 shipment. Finally, a 2,000-ton lot was likely to be moved from Daesan to Dongguan and Guangzhou, China, in first half Oct.

Upstream, November ICE Brent Singapore futures were trading at $98.56 per barrel in afternoon trading on Sept. 18, compared to $96.63/bbl for October futures on Sept. 15.

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