Asia Base Oil Price Report


With crude dropping to a five-year low and a base oil glut continuing, a major Southeast Asian refiner decided to decrease its list prices again.

This is the ninth price revision that the producer has undertaken since September, market sources said, reflecting the persistent downward trend that has engulfed base oil prices since the third quarter of 2014.

It was heard that the producer had communicated to its customers on Jan. 6 that it would be lowering its API Group I solvent neutral 150 and SN600 cuts by a hefty U.S. $80 per metric ton, while its bright stock would move down $50/t. Similarly, its Group II 150 neutral grade would be marked down $50/t and its 500N would drop $40/t, all with an effective date of Jan. 9.

The producer had previously adjusted prices down on Dec. 29, when the producers Group I and II prices had fallen by $35/t, including SN150, SN600, bright stock in the Group I category, and 150N and 500N in the Group II segment.

A second producer was also heard to have lowered its list prices for January cargoes. Taiwanese producer Formosa Petrochemical was understood to have reduced the price of its Group I 70N and 150N cuts, which are priced in New Taiwanese Dollars, by approximately $75/t, while its 500N plunged by around $80/t.

Formosa had also embarked on price revisions in December, with its Group II list prices falling by $40/t on its lighter grades, and $35/t on its 500N oil.

The producer is expected to shut down its 600,000 metric tons per year Group II plant in Mailiao for a one-month maintenance program in March. A previous scheduled turnaround at this plant was conducted in August and September 2013.

While the price decreases were expected to attract fresh buying interest, it is difficult to ascertain whether the cuts will indeed entice buyers to place more orders. Some participants commented that the decreases actually seem to cement the belief that prices could come down more in the next few weeks, making buyers and traders feel hesitant about securing more than the bare minimum.

A vast majority of market players are keeping a keen eye on crude oil prices, as plunging values since mid-2014 are seen as the main contributors to the dramatic fall in base oil prices.

While it is difficult to determine whether crude oil values will stabilize any time soon, analysts maintain that a global supply glut will continue to exert pressure during the first half of 2015.

Crude has dropped by more than 50 percent since June as U.S. output continues to grow and the OPEC decided not to revise its production ceiling last month.

Likewise, an oversupply of base oils is also weighing down on base stock prices on a global scale. Prices have been on a downward spiral in the U.S., Europe, the Middle East, as well as Asia, thwarting trade between regions, as market players find it more difficult to make prices work.

In India, there has been a reduction in imports from the U.S., given ample local supply, falling domestic price indications, and attractive offers of Northeast Asian product. The introduction of additional base oil volumes in the Middle East this year could lead to even more competition among suppliers eager to gain or maintain market share in India, sources said.

Indian producers have also reduced prices for January, reflecting the regions downward price trend amid sliding crude oil and feedstock costs. It was heard that the main refiners had lowered Group I list prices between two and four rupees per liter the first week of January. This follows price cuts in the previous months as well.

Asian base oil price assessments underwent revisions this week on the back of slipping buying and selling indications.

On an ex-tank Singapore basis, Group I SN150 prices were assessed down by $30-40/t at $780-$800/t, and SN500 at $770-$810/t. Bright stock was assessed at $1,110-$1,130/t.

Group I SN150 was also down by $20-30/t at $670-$710/t FOB, while SN500 was heard at $660-$690/t FOB. Bright stock prices were assessed at $1,070-$1,100/t FOB.

Within the Group II segment, prices were assessed lower by $30/t at $640-$660/t FOB Asia for 150N, and at $650-$680/t FOB Asia for 500N.

Group III prices were notionally assessed slightly lower by $20/t, with the 4 centiStoke and 6 cSt oils at $980-$1,000/t FOB Asia and the 8 cSt grade at $880-$900/t FOB Asia, although no concluded deals were reported.

On the shipping front, activity started to pick up during the week, especially for cargoes moving from South Korea, with a 1,000-ton cargo of base oils expected to be shipped from Ulsan to Zhapu, China, on a prompt basis. A second prompt cargo was being discussed for Ulsan to Tianjin, China, as well. A 2,000-ton lot of three grades was on the table for Ulsan to Shanghai, China, for second half of January lifting. A 2,000-ton cargo was expected to be fixed from Yeosu to Dongguan, China, on Jan. 16-25. A 5,500-ton parcel of four grades was likely to be shipped from Yeosu to Mumbai, India, on Jan. 5-15. A 2,300-ton cargo was being worked for Yeosu to Ennore, India, for the same dates. A 1,000-ton parcel was being quoted for Yeosu to BBT Tank Terminal Merak, Indonesia, for Jan. 20-30 shipment, while a second cargo of 1,500 tons made up of two grades was also expected to cover Yeosu to Merak with the same lifting dates.

Upstream, February ICE Brent Singapore futures were trading at U.S. $48.62 per barrel in afternoon trading on Jan. 12, compared to $55.45 per barrel on Jan. 5.

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