Asia Base Oil Price Report


Asia base oil prices continue on a downward trajectory, with regional producers adjusting prices once again as part of an unusual series of consecutive revisions.

Sources said that a major Southeast Asian base oil producer had lowered its ex-tank list prices again this week, only about two weeks after a previous decrease, with the reductions applying this time to most API Group I and Group II grades.

The supplier was heard to have trimmed its Group I solvent neutral 150 and SN500 cuts by $50 per metric ton, with an effective date of Nov. 21. The only exception was the price of bright stock, which remained intact given a tight supply/demand situation for this particular grade in Asia.

Market sources explained that bright stock requirements have remained fairly healthy, while production of this grade is expected to be more limited in the region, especially once the CPC/Shell plant in Taiwan is permanently shut down before the end of the year.

Furthermore, a majority of Group I grades can be replaced with Group II cuts, which are currently plentiful and priced at very similar levels, while bright stock is not easily swapped.

Additionally, the Southeast Asian refiner also reduced its Group II 150 neutral and 500N grades by $50/t on the same date. Producer confirmation about the decreases was not forthcoming.

This is the fifth time the supplier has sliced prices since September, reflecting the dire conditions in the Asian base oils market. Weak demand and an overabundance of product are the main reasons for the price reductions, but plunging crude oil and feedstock costs are also seen as major contributors to the drops.

This week, Brent futures were trading in the high $70s per barrel, significantly down from levels near $100/bbl seen in September.

In Taiwan, producer Formosa Petrochemical was also understood to have lowered its Group II offers, the second reduction in a month.

Market sources said that Formosa had adjusted its domestic list prices down by $30-50/t in an effort to place product ahead of the end of the year.

Formosa had also reduced its November Group II spot offers into China by $80-85/t for its 150 neutral grade, and $90-100/t for its 500N in early November.

Weak fundamentals are not only affecting the Asian market, but are also causing sharp downward adjustments in the U.S. and Europe.

U.S. domestic prices have seen several consecutive cuts in recent weeks, and there has been talk that suppliers there had been hoping to offload some cargoes into Asia, ahead of year-end inventory reductions.

However, demand in Asia is less than robust, and lower regional offers are making imports less attractive, sources said.

There are reports that the price of some parcels had to be renegotiated while the cargoes were en route because prices have been dropping so rapidly, especially in the case of cargoes with long lead times priced at delivery. This added to the feeling that it would be very risky to transact foreign cargoes in the current market environment, sources explained.

Importers also said that buyers are not willing to secure significant volumes because they prefer to end the year with low inventories for tax purposes, and the size of deep-sea cargoes is usually quite large -around 5,000 tons and higher. With demand from downstream applications having subsided in the region – particularly in China – and the market outlook not being too optimistic, there are few takers for such big cargoes, sources said.

Given recent downward price adjustments, together with this weeks fresh decreases, the assessed Asia prices have been revised down to reflect the latest bids/offers and transaction levels, although trading was generally subdued.

On an ex-tank Singapore basis, Group I solvent neutral 150 prices were assessed down by $100/t to $930-$970/t, and SN500 down by $120 at $900-$960/t. Bright stock was unchanged at $1,180-$1,225/t.

On an FOB Asia basis, Group I SN150 was heard down by $20-30/t at $810-$830/t FOB, while SN500 was down $50-60/t at $790-$820/t FOB. Bright stock prices were assessed slightly up at $1,150-$1,170/t FOB to reflect current market pricing more closely.

Within the Group II segment, prices were also lower by $40-50/t for 150N at $790-$820/t FOB Asia, and also down $50/t for 500N at $810-$840/t FOB Asia respectively.

In the Group III segment, prices of 4 centiStoke and 6 cSt oils were assessed up from last week on fresh pricing input at $1,020-$1,040/t FOB Asia, and the 8 cSt grade was unchanged at $960-$990/t FOB Asia.

On the shipping front, several inquiries to move base oils from South Korea were located. A 2,000-metric ton lot was discussed from Yeosu to Tianjin, China, for Nov. 20-28 lifting. A 1,000-ton lot was on the table for Yeosu to Nantong, China, for Nov. 25-30 shipment. A 4,500-ton cargo of two grades was expected to be shipped from Yeosu to Mesaieed, Qatar, for Jan. 1-10 lifting. A 2,500-ton cargo plus an additional 1,200 tons were expected to be shipped from Yeosu to Taichung, Taiwan, and Haiphong, Vietnam, between Dec. 10-20.

A 3,000-ton lot was being worked on from Daesan to Merak, Indonesia, for prompt shipment. A 2,000-ton parcel of two grades was likely to be shipped from Daesan to Godau, Vietnam, on Dec. 24-30.

Additionally, a 1,000-ton cargo was expected to be shipped from Karachi, Pakistan, to Chennai, India, between Nov. 25-30. A 7,000-ton lot was being discussed for Livorno, Italy, to Singapore for Nov. 25-Dec. 5 shipment.

Upstream, December ICE Brent Singapore futures were trading at $80.45 per barrel in afternoon trading on Nov. 24, compared to $78.08 per barrel on Nov. 17.

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