Asia Base Oil Price Report


Concerns over global economic uncertainties, weakening oil prices and oversupply continue to dampen base oil trading in Asia.

Producers said that buyers have been hesitant to secure product because there is a chance that prices, which have been on a downward trend for at least three months, could weaken further.

Consumers reiterated that aside from general market conditions that warrant waiting, demand from downstream segments has been disappointing.

Additionally, a number of producers are selling certain base stock grades bundled with others, which makes concluding business more difficult. Given slower demand of the API Group I heavy-vis cuts, suppliers have resorted to selling bright stock, which continues to command healthy demand, in combination with cuts such as solvent neutral 500.

This strategy might work well for larger buyers, but small consumers who use bright stock in specific applications sometimes do not need to purchase substantial amounts of SN500, sources commented.

The price of SN500 has been under pressure because of ample supply against weakening demand. Given plentiful availability of Group II 500 neutral at very competitive prices, many consumers are using the higher performance cut in lieu of the SN500 oil.

Although Group I barrels will disappear from the market when the CPC-Shell plant in Kaohsiung, Taiwan, closes its doors before the end of the year, consumers are not worried, because the vast availability of Group II oils will likely fill the gap.

Bright stock is a different story because it cannot be easily replaced, sources underscored, and prices are therefore steady.

This is not the case for most other base oils, as suppliers have revised spot prices down in recent weeks, with the intent of placing more volumes and remaining competitive in a thinly traded market.

Last week, a major Southeast Asian producer decreased its Group II list prices by $30 per metric ton. Sources said that the supplier had lowered both its 150N and 500N cuts by the same amount, with an effective date of Oct. 13. The same date applied to adjustments made for Group I and Group II+ cuts produced in the United States.

Similarly, a South Korean producer was heard to have lowered its spot Group II offers of 150N and 500N to China by $80/t from September levels, according to sources. The supplier is a relative newcomer to the base oils stage and was heard to be making efforts to gain market share in the region, although a large portion of its production is allotted to its downstream lubricants operations.

Chinese manufacturing activity was slowly starting to perk up after the week-long National Day holiday in early October, but buying interest remained rather lackluster because of a seasonal slowdown in downstream segments, coupled with buyers cautious stance.

Base oil buyers were reluctant to acquire large quantities on concerns that prices would continue to soften in the short term, given a weakening of market fundamentals.

Availability of imports in China has been plentiful, with a Taiwanese Group II supplier heard to have increased both spot and contract volumes moved into that country during October, despite the fact that it was understood to be running its base oil unit at 75-80 percent capacity because of weak market economics.

At the same time, the delayed restart of a Russian facility, which typically exports to China at competitive prices, was expected to help balance the supply/demand ratio of Group I. The plant was originally scheduled to be restarted in September, following a routine turnaround, but the process has suffered some setbacks and is now expected to be completed in late October, according to sources.

A couple of price assessments in Asia were revised this week to better reflect current buying and selling indications, but concluded that business remained difficult to track.

On an FOB Asia basis, Group I SN150 was assessed at $910-$940/t FOB, while SN500 was heard at $920-$960/t FOB. Bright stock prices were $20/t higher than last week at $1,165-$1,185/t FOB.

Within the Group II segment, prices for 150N were mentioned at $920-$940/t FOB Asia, while 500N was hovering at $940-$970/t FOB Asia.

Group III prices were harder to assess because of the disparity of offers among suppliers and the various cargo sizes being discussed. Prices of 4 centiStoke and 6 cSt oils were assessed at $1,010-$1,050/t FOB Asia. The 8 cSt grade was steady at $990-$1,020/t FOB Asia.

On the shipping front, there was quite a bit of interest to move product to Southeast Asia. A 3,000-metric ton cargo of four base oil grades was being discussed for Yeosu, South Korea, to Merak, Indonesia, for shipment in the second half of October. Also originating in South Korea, a second 3,000-3,500 ton lot was expected to be moved to Merak from Daesan for Oct. 20-30 lifting. A 1,000-2,000 ton parcel was on the table from Daesan to Singapore for Oct. 20-30 shipment. A 500 ton lot of 600N was mentioned for Yeosu to Taichung, Taiwan, for Oct. 23-30 lifting. A 3,000 ton cargo of two grades was likely to move from Yeosu to Nantong, China, between Oct. 20-30. A 2,500 ton parcel was expected to be shipped from Yeosu to Tianjin, China, around Oct. 20-30 as well.

In Taiwan, a 2,000-3,000 ton lot was on the table for Mailiao to Dongguan, China, for Oct. 26-30 lifting.

In Japan, a 1,500 ton parcel was likely to be shipped from Yokkaichi to Tianjin between Oct. 24-30.

Additionally, a 1,000 ton cargo was being worked on from Hong Kong to Bangkok, Thailand, for Nov. 1-5 shipment, while a second 500 ton lot was under discussion for Hong Kong to Singapore for Nov. 5-10 lifting.

Upstream, November ICE Brent Singapore futures were trading at $86.04 per barrel in afternoon trading on Oct. 20, compared to $88.14 per barrel on Oct. 13.

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