Asia Base Oil Price Report


While market participants continued to monitor the diverging price trends for light and heavy low-viscosity and high-vis base oils, discussions also focused on the devaluation of the Chinese currency and a massive explosion that rocked Tianjin, China, this week.

The People’s Bank of China unexpectedly depreciated the yuan by nearly 2 percent overnight on Tuesday, Aug. 11, and then made other currency adjustments the following two days. The moves come amid a slowdown in the world’s second-largest economy, and an 8 percent decline in exports in July, media sources reported.

The depreciation itself was not considered significant, but financial markets reacted to the uncertainty of the country’s prospects and the possibility of further devaluations.

China was also the scene of massive explosions that rocked the port of Tianjin late on Aug. 12. The blasts occurred after a shipment of explosives caught on fire in a warehouse owned by a company that specializes in handling dangerous and toxic chemicals. The blasts killed more than 100 and sent hundreds to local hospitals.

Tianjin, the port gateway to Beijing, is home to several petrochemical companies and refineries and some of China’s strategic oil reserves. The explosions caused delays in the movement of petrochemical cargoes going in and out of the port immediately after the explosions, according to Reuters, but port operations were heard to have resumed.

In terms of base oils, the economic uncertainties in China are expected to translate into softer demand for finished lubricants, market sources said.

The Chinese market was already showing signs of weakening ahead of the fall season, and the latest economic policies could exacerbate the slowdown.

There were reports that the start-up of a new Sinopec base oil plant, which was originally expected to occur in April and has been repeatedly postponed, has now been postponed to October, given weak market conditions and some technical issues. The plant, located in Nanjing, Jiangsu province, will have the capacity to produce 200,000 metric tons of Group II oils per year.

But concerns about prospects over the next few months were not limited to China.

Overall base oil market sentiment was deemed very cautious, with buyers, as well as sellers, continuing to show hesitation about concluding spot transactions, as it was difficult to predict whether prices would remain stable, or be pulled down by waning demand and falling crude oil and feedstock prices.

The downward price pressure recently observed on low-viscosity base oil grades continued to be evidenced in falling spot and list price indications. On the other hand, prices of the high-viscosity oils seemed to be moving up on tight spot availability.

In Taiwan, Formosa Petrochemical Corp. implemented both upward and downward adjustments on its August domestic prices. The producer was heard to have decreased its API Group II 70 neutral by a U.S. dollar equivalent to slightly over $10 per metric ton, and its 150N by about $23/ton.

At the same time, the supplier lifted the price of its high-viscosity Group II 500N by a dollar equivalent of about $10/ton, and the increase was heard to be driven by ongoing regional tightness of the heavy-vis cuts.

Similar price movements have been observed in buying and selling indications throughout Asia, with prices showing fluidity within the assessed price spreads, but remaining largely range-bound on a lack of concluded deals.

On an ex-tank Singapore basis, Group I SN150 prices were heard at $640/t-$670/t, while SN500 was hovering at $800/t-$820/t. Bright stock was assessed at $1,130/t-$1,150/t.

On an FOB Asia basis, Group I SN150 was holding at $550/t-$580/t, although some buying ideas were also heard below the bottom end of the range. SN500 and bright stock were assessed at $710/t-$730/t FOB, and $1,100/t-$1,120/t FOB, respectively.

Within the Group II category, prices for 150N were unchanged at $580/t-$600/t FOB Asia, although they remained exposed to downward pressure, and prices for 500N were heard at $730/t-$755/t FOB Asia.

Within the Group III segment, the 4 centiStoke and 6 cSt oils were gauged at $910/t-$930/t FOB Asia, while the 8 cSt grade was holding at $680/t-$700/t FOB Asia.

On the shipping front, there was a flurry of inquiries to move product out of South Korea. A 1,000-metric ton cargo was being discussed from Yeosu to Singapore for Aug. 25-29 shipment. A 3,200-ton parcel of five base oil grades was expected to cover Yeosu to Mumbai, India for Aug. 24-29 lifting. A 1,000-ton cargo of two grades was on the table for Yeosu to Merak, Indonesia, for Aug. 25-29 shipment. A 600-ton lot was being worked on for Yeosu to Taichung, Taiwan, for Sep. 1-5 lifting. A 1,000-ton lot of two grades was expected to be shipped from Yeosu to Ho Chi Minh, Vietnam, also between Sep. 1-5. A 1,500-ton parcel was quoted for Onsan to Tsurumi, Japan, for Aug. 17-19 lifting. A 1,700-ton cargo of three grades was expected to be shipped from Onsan to Zhenjiang and Taicang, China, between Aug. 19-21.

There was also a 5,000-ton lot being discussed from Hamriyah, United Arab Emirates, to Pipavav, India, for prompt shipment.

Upstream, September ICE Brent Singapore futures traded at $50.06 per barrel in afternoon trading on Aug. 13, compared to $50.49 per barrel on Aug. 11.

Gabriela Wheeler can be reached directly

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