Asia Base Oil Price Report


Asian base oil prices experienced further declines on persistent oversupply, subdued buying interest, and volatile crude oil prices. Producers in the region cut prices once again in an effort to keep up with the bearish fundamentals.

Industry sources indicated that a major Southeast Asian refiner had lowered its API Group I and II ex-tank Singapore indications this week, following a string of similar downward revisions implemented since September.

This time around, the supplier decreased the price of its Group I solvent neutral 150 and SN500 by U.S. $50 per metric ton, while its Group II 150 neutral and 500N were marked down by $90/ton as of Dec. 3. The only exception was the price of bright stock, which was left unchanged as this cut continues to enjoy relatively healthy demand against a backdrop of snug supplies, sources said. Producer confirmation about the price adjustments could not be obtained.

The decreases come on the heels of a previous round of ex-tank price cuts, which became effective on Nov. 21, and had resulted in drops of $50/ton for Group I and Group II cuts, with bright stock again being spared of any revisions.

A second producer was heard to have reduced prices for its December shipments as well, in line with falling indications in the region. Taiwanese producer Formosa was said to have trimmed its December Group II list prices by $35-40/ton, with the producers lighter grades experiencing decreases of around $40 and the 500N cut the smaller drop of $35/ton.

Downward price adjustments are fairly common toward the end of the year, when suppliers and traders focus on lowering stocks and look to offer incentives to capture business. However, the reiteration of decreases so close to each other over the last two months is almost unprecedented, sources commented.

It is also difficult to predict when prices will stabilize, as discussions of further drops in crude oil and feedstock prices abound, and additional price cuts on the base oils side could not be discarded.

A few market participants tried to maintain an optimistic view and expected prices to reach a floor at the end of the year. They could then start to move up in the first quarter as buyers return to the market to replenish inventories.

For the time being, however, buyers are maintaining a very cautious attitude and are securing minimal volumes on concerns that prices could be decreased again soon.

The situation is very difficult for everyone. For traders, it is risky to buy a cargo at a certain price one day, only to see the price fall the following day and then be caught with more expensive material, a trader explained.

At the same time, the disinterest in base oil cargoes results in more product going unsold, pushing suppliers to lower prices even more, which creates a vicious circle. Additionally, there seem to be fewer opportunities to export base oils, as prices are plummeting in all regions. In India, domestic prices have been adjusted down by the local producers in an effort to remain competitive, and there has been a decrease in the number of cargoes imported from the U.S.

The base oil trade flow is changing, but South Korean producers are still the main exporters of Group II oils to India, explained Joe Rousmaniere, Business Development Manager at Chemlube International, during a presentation at the ICIS Pan-American Base Oils and Lubricants Conference in New Jersey, United States, Dec. 4-5. According to Rousmaniere, the volumes exported to India from South Korea can vary from month to month, but reached 130,000 tons/month at one point during the period between Oct. 2013 and Oct. 2014. India is the second largest import market of base oils in the world after China.

Moving forward, Rousmaniere predicted, The Asian Group II producers will battle amongst themselves east of [the] Suez [Canal] in China, Southeast Asia and – most importantly – India, while U.S. Gulf of Mexico Group II producers will dominate supplies to areas west of Suez, including Europe, the Americas and Africa.

In terms of prices, Asian indications continued to spiral downward this week. On an ex-tank Singapore basis, Group I SN150 prices were assessed down by $50/t to $850-$890/t, and SN500 to $830-$890/t. Bright stock was unchanged at $1,170-$1,210/t. On an FOB Asia basis, Group I SN150 was assessed down by $30/t at $770-$790/t FOB, while SN500 was also down $30/t at $750-$780/t FOB. Bright stock prices were unchanged at $1,150-$1,170/t FOB.

Within the Group II segment, prices were also adjusted down $20-30/t to $760-$780/t FOB Asia for 150N, and to $770-$800/t FOB Asia for 500N. In the Group III segment, prices of 4 centiStoke and 6 cSt oils were also down $20/ton from last week at $1,000-$1,020/t FOB Asia, and the 8 cSt grade was assessed at $940-$970/t FOB Asia.

On the shipping front, discussions to move base oils from South Korea appear to have fizzled out for the moment. A 2,000-metric ton lot of two base oil grades was on the table for Daesan to Godau, China, for Dec. 24-30 lifting. A 900-ton parcel of two grades was expected to be shipped from Onsan to Taichung, Taiwan, between Dec. 26-Jan. 5. A 5,000-ton lot of two grades was being worked on from Yeosu to Beihai, China, for Dec. 15-20 shipment.

Lastly, a 3,000-ton parcel composed of two grades was expected to be shipped from Hong Kong to Yokohama, Japan, for Dec. 27-30 lifting.

Upstream, January ICE Brent Singapore futures were trading at $67.99 per barrel in afternoon trading on Dec. 8, compared to $68.13 per barrel on Dec. 1.

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