Recent drops in crude oil and feedstock prices were also seen as significant factors leading to the lower base oil prices, and although some signs over the last few days point to the possibility that crude prices might stabilize, there are expectations that global crude supply will continue to outpace demand in coming months, resulting in further drops.

Many downstream lubricant facilities also idle operations temporarily during the holidays and do not resume production until January, reducing the demand for base stocks.

Some distributors and importers are already looking to secure cargoes for January delivery, however, as they expect consumers to start the new year with depleted inventories, sources commented.

Furthermore, there is speculation that base oil prices will have hit the bottom toward the end of December and will start to inch up again in January, although many are not confident of a price recovery any time soon.

Current oversupply conditions are not expected to improve overnight, while additional capacity coming on stream in Asia and the Middle East next year is anticipated to weigh down the supply system further.

ExxonMobil is planning on bringing an API Group II expansion on line at its Singapore plant in early 2015, while the Takreer plant in Abu Dhabi will be adding 100,000 tons per year of Group II and 500,000 t/y of Group III to the market in the first quarter of 2015 as well.

The oversupply has mostly been evident in the Group II segment in Asia with the inception of new tons from the Hyundai Oilbank-Shell plant in Daesan, South Korea, in August. Although a large portion of the output from the plant is allotted to Shells downstream lubricant facilities, there are a few cargoes that are shipped into various export destinations, with China being a favored target.

Despite the fact that the increase in supply has been mostly of Group II oils, Group I prices have also suffered because the price gap between the two categories has almost disappeared, which allows consumers to use the higher-performance Group II base stocks in Group I applications.

One of the products spared from the downward price adjustments over the last several months has been bright stock, but values of this cut have also now succumbed to the pressure.

In the key China market, Group I requirements have slowed down significantly and spot offers for bright stock have been adjusted down to levels around $1,160 per metric ton FOB Asia for December lifting. However, buyers are showing limited interest as they try to cover requirements through contracts or by using up existing stocks.

As a result of the slow demand and mounting inventories, some may be cutting production in coming weeks, or shutting down temporarily. Many manufacturers use the slower months for routine turnarounds.

Chinese producer Sinopec Jinan is expected to start a thirty-day turnaround at its 150,000 t/y Group II unit in Jinan in December, while Sinopec Jingmen was heard to have shut down its 100,000 t/y Group II base oils plant in Jingmen in mid-November for maintenance and upgrades as well.

Meanwhile in India, domestic list prices have also lost ground in November in line with regional downward price adjustments, and prospects are not very encouraging for December. Indian refiners have lowered prices as demand has declined and availability remains plentiful, while competition with imports remains one of the main concerns.

According to sources, in the latest effort to offer attractive pricing, local suppliers lowered Group II prices by approximately 4 to 7 Indian rupees per liter. These cuts are significantly higher than previous ones, which centered around decreases of about 1 to 2 Indian rupees/liter. However, it was not yet clear whether the strategy would result in increased sales.

Asian suppliers are holding on to hopes that base oil requirements in general will pick up in January and early February next year, ahead of the Lunar New Year and Spring Festival celebrated February 19-24, but there is currently very little spot trading taking place and spot assessments are difficult to pin down.

The Asia price ranges have been assessed stable-to-soft to reflect current market discussions and sentiment.

On an ex-tank Singapore basis, Group I solvent neutral 150 prices were assessed down by $30/t to $900-$940/t, and SN500 down by $20/t at $880-$940/t. Bright stock was down by $10-15/t at $1,170-$1,210/t.

On an FOB Asia basis, Group I SN150 was assessed down by $10/t at $800-$820/t FOB, while SN500 was also down $10/t at $780-$810/t FOB. Bright stock prices were unchanged at $1,150-$1,170/t FOB.

Within the Group II segment, prices were also adjusted down $10/t to $780-$810/t FOB Asia for 150N, and to $800-$830/t FOB Asia for 500N.

In the Group III segment, prices of 4 centiStoke and 6 cSt oils were stable from last week at $1,020-$1,040/t FOB Asia, and the 8 cSt grade was holding at $960-$990/t FOB Asia.

On the shipping front, there was heightened interest to move product from South Korea to several destinations in Asia. A 3,500-metric ton lot was being discussed from Yeosu to Ennore, India, for Dec. 1-15 shipment. A 2,000-ton of two base oil grades was expected to be shipped from Yeosu to Chennai, India, on Dec. 8-12. A 2,000-ton parcel of 150N was on the table for Yeosu to Taichung, Taiwan, for Dec. 1-7 lifting.

A 1,000-ton cargo was quoted for Yeosu to PT Pacific Lubritama, Indonesia, for Dec. dates. A 4,500-ton lot made up of two grades was still being discussed from Yeosu to Mesaieed, Qatar, for Jan. 1-10 shipment. A 2,000-ton lot made up of two base oil grades was being worked on from Daesan to Godau, China, for Dec. 24-30 shipment.

In Japan, a 2,000-ton cargo was mentioned for Mizushima to Nantong, China, for Dec. 20-25 lifting. A 1,500-ton lot was being quoted for Mizushima to Busan, South Korea, for Dec. 5-10 shipment. Lastly, a 2,300-ton parcel was on the table for Mizushima to Hong Kong for Dec. 10-15 lifting.

Upstream, January ICE Brent Singapore futures were trading at $68.13 per barrel in afternoon trading on Dec. 1, compared to $80.45 per barrel on Nov. 24.