Asia Base Oil Price Report


Despite a subtle improvement in demand, Asian base oil market participants maintain a cautious stance given crude oil price volatility and oversupply conditions in certain segments of the market.

Suppliers lifted spot offer levels at the beginning of the month because crude prices had shown signs of stabilizing and buying appetite for base oils had increased.

High-viscosity grades in particular had started to tighten because of reduced operating rates and a couple of turnarounds at regional base oil facilities, combined with healthier requirements for these cuts.

However, some players attributed the recent rise in demand to the fact that buyers had limited purchases in the previous months and inventories had been depleted, sending consumers back to the market to replenish stocks.

Whether the reinvigorated demand would last was difficult to predict, but suppliers felt a certain degree of confidence in the fact that the spring production season for lubricants would continue to spawn fresh requirements.

Given the snug scenario for most of the heavier base oils, cuts such as the API Group II 500/600 have seen prices inch up by U.S. $10 to $20 per metric ton on higher offer levels from regional suppliers.

Spot availability of light-vis oils is more plentiful, and prices have remained stagnant. In some cases, suppliers have been able to buoy values by selling low-vis cargoes in a bundle with the more sought-after high-vis cuts.

However, supply levels in general are expected to increase after a number of maintenance turnarounds have been completed so plants may be brought back on stream. In Thailand, Integrated Refinery Petrochemical Complex (IRPC) had shut its 320,000 t/y Group I base oil unit in Rayong for maintenance earlier this month but was heard to have resumed production last week.

In Taiwan, Formosa Petrochemical took its Group II base oil plant in Mailiao off-line for a month-long turnaround. The unit has a capacity of 600,000 t/y and is expected to be restarted at the end of March. In China, Fushun Petrochemicals Group I plant in Liaoning province is also slated to be restarted at the end of March. Fushun Petrochemical, a PetroChina subsidiary, idled its 260,000 t/y Group I plant for maintenance in January and was originally expected to come back on stream in February.

Additional material is anticipated to become available from other refiners because of improved operating rates at their base oil plants, and spot exports to the key China market are anticipated to rise in April, according to sources. Several producers have been running plants at reduced capacity because of squeezed margins and oversupply, but since values have started to move up, operating rates are likely to be increased.

At the same time, some bright stock and naphthenic base oil volumes will be taken out of the Chinese supply system as PetroChina Karamay Petrochemical is scheduled to shut its 700,000 t/y base oil plant for a two-month turnaround in April.

Meanwhile, in India, discussions for April cargoes are starting to heat up, but have so far been lackluster as players have been working on the conclusion of the Indian fiscal year, which runs from Apr. 1 to March 31.

It was heard that offers for Northeast Asian material into India have moved up in line with regional price hikes, especially for the Group II heavy-vis grades, and business was understood to be taking place above $700/t CFR India, with some numbers mentioned near $720/t CFR, although buyers deemed levels near $680-690/t CFR more workable.

Group I availability from local producers was still plentiful, but imports continued to be transacted within a range of $600-650/t CFR India for solvent neutral 150 and $620-670/t CFR for SN500.

Prices for some base oil cuts have advanced in Asia this week, while others have remained stable or were adjusted down slightly to bring numbers more in line with market discussions.

As mentioned above, values for the heavier grades have generally moved up on higher buying and selling ideas, but a couple of low-vis cuts have also inched up.

On an ex-tank Singapore basis, Group I solvent neutral 150 prices were holding at $660-$680/t, and SN500 was assessed up by $20/t at $670-$710/t. Bright stock was heard at $1,010-$1,050/t, also reflecting a $20/t increase at the high end of the spread.

On an FOB Asia basis, Group I SN150 was steady at $540-$570/t FOB, while SN500 was holding at $560-$580/t FOB. Bright stock prices edged up by $20/t to $1,000-$1,020/t FOB.

Group II prices were assessed at $560-$600/t FOB Asia for 150 neutral, showing a $10/ton increase at the high end of the range, and were revised up by $20/t at the top end at $630-$670/t FOB Asia for 500N.

Group III prices were steady, with the 4 centiStoke and 6 cSt oils heard at $960-$980/t FOB Asia. The 8 cSt grade was assessed slightly down at $760-$780/t FOB Asia on market discussions.

On the shipping front, only a handful of fresh inquiries to move base oils emerged this week, with a 5,800-ton cargo made up of several grades being discussed to cover Ulsan, South Korea, to Shanghai and Zhenjiang, China, for end of March loading. A 1,800-ton parcel was also quoted for Ulsan to Zhenjiang for Apr. 1-5 lifting. A 2,000-ton lot was expected to be shipped from Ulsan to Kandla, India, between Apr. 20-30. A 3,000-ton cargo was on the table for Daesan, South Korea, to Quanzhou and Dongguan, China, for March dates. A 3,700-ton lot was expected to be shipped from South Korea to Yingko, Taiwan, and Tianjin, China, March 28-30.

Upstream, April ICE Brent Singapore futures were trading at U.S. $54.41 per barrel in afternoon trading on March 23, compared to $53.99 per barrel on March 16.

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