Asia Base Oil Price Report


Volatile crude oil and feedstock values, coupled with lackluster demand and plentiful supply drove spot base oil prices down again this week in Asia.

Following a week of largely unchanged pricing, base oil bids and offers edged down as buying interest has not picked up steam as had been expected after the recent holidays.

In order to move product out, suppliers have trimmed offers, while buyers’ indications were also heard to have slipped.

Even though it was heard that regional suppliers had adjusted operating rates at base oil plants to avoid a buildup of inventories, and some plants have also started turnarounds, there is enough product to go around and there are no shortages reported.

As a result, buyers can afford to shop around and are willing to delay purchases to achieve lower prices, while suppliers are hoping to reduce inventories ahead of the end of the year due to tax implications.

In China, a number of Sinopec plants are undergoing routine turnarounds, including the producer’s Beijing and Nanyang facilities. It was heard that PetroChina would be idling its base oil plant in Daqing before the end of the year as well, although this could not be confirmed with the producer. The unit has a capacity of 205,000 metric tons per year of API Group I base oils, according to Lubes’n’Greases’ Guide to Global Base Oil Refining.

PetroChina’s Fushun base oil plant, which can produce 285,000 t/y of Group I oils, has been shut down since the end of last year due to market economics. The plant was expected to be restarted last July, but weak market conditions are prolonging the shutdown.

Aside from turnarounds, there have also been fewer cargoes moving into China because general buying interest for imports has been fairly subdued.

There had also been an influx of imports from the Middle East and the United States into India and other destinations earlier in the year, but the situation has changed, and there have been arbitrage opportunities for Asian suppliers to ship base oils into the U.S.

Indeed, a couple of large Group II high-viscosity Asian base oil cargoes were heard to be on the water to the U.S. However, one of them was heard to have been shipped by a South Korean producer to support the operations of a U.S. supplier whose plant has been experiencing production issues.

A second 10,000-metric ton cargo was also said to have been recently dispatched from the same South Korean supplier to Antwerp for the U.S.-based refiner’s European operations.

Partly as a way to discourage Asian cargoes from moving into the U.S., producer Motiva announced a posted price decrease of 10 cents per gallon across the board, which became effective Oct. 14.

Asian, European, and U.S. suppliers were also keeping an eye on developments in the Middle East. If sanctions on Iran are lifted and the country starts to export more base oils, certain markets such as India could see a fresh flow of base stock, which would be in direct competition with material from sources that have so far been supplying the Indian market.

There was also some attention centering on the upcoming startup of the new Abu Dhabi National Oil Company (Adnoc) plant in Ruwais, anticipated to be brought on stream in March or April, according to reports heard at the ICIS Middle East base oils conference in Dubai Oct. 12-14. The plant will have capacity to produce 620,000 t/y of Group II/III base oils and was originally expected to start commercial output in 2015.

Given softer crude oil prices during the week, base oil indications in Asia continued to move down, with price drops seen in the ex-tank Singapore market. The API Group II cuts were said to be especially susceptible to markdowns given plentiful availability.

The heavy-viscosity grades and bright stock within the Group I category, on the other hand, are generally less prone to replacement and were better positioned to maintain their value as they seemed tighter, sources explained.

Within the Group II segment, spot prices for the 150 neutral cut dropped about U.S. $40 per metric ton ex-tank Singapore given tepid demand against ample supply.

The heavy-vis cuts 500/600N dipped by a more moderate amount than the 150N oil, with decreases of about $10/t noted.

As a result of these adjustments and the downward pressure on FOB Asia indications, price assessments have been revised down in Asia for several cuts.

On an ex-tank Singapore basis, Group I SN150 prices were assessed at $580/t-$600/t, while SN500 was heard lower by $10/t at $690/t-$710/t. Bright stock was unchanged at $1,000/t-$1,020/t.

Group II 150N values were revised down by $40/t at $560/t-$580/t ex-tank Singapore, while the 500N cut was adjusted down by $10/t at $740/t-$760/t.

On an FOB Asia basis, Group I SN150 was assessed at $500/t-$540/t, SN500 at $600/t-$620/t FOB, and bright stock at $930/t-$960/t FOB.

Within the Group II category, prices for 150N were slightly down by $10/t at the low end at $490/t-$520/t FOB Asia, while 500N was also assessed down by $10/t at $680/t-$700/t FOB Asia.

In the Group III segment, the 4 centiStoke and 6 cSt oils were unchanged at $900/t-$930/t FOB Asia, while the 8 cSt grade was heard at $660/t-$680/t FOB Asia.

A steady stream of inquiries to move base oils ex-South Korea was detected on the shipping front. A 7,350-metric ton cargo composed of five base oil grades was quoted for Yeosu to Mumbai, India, for late October shipment. A 600-ton lot was expected to be shipped from Yeosu to Taichung, Taiwan, in early November for discharge after Nov. 10. A 1,500-ton parcel was being worked on for Yeosu or Ulsan to Koh Si Chang, Thailand, for second half of Oct. lifting. A 7,350-ton lot was being discussed for Yeosu to Mumbai, India, for any late October dates. A 2,700-ton cargo was on the table for Yeosu to Chennai, India, for Nov. 13-25 lifting. A 1,700-ton lot was expected to be shipped from Yeosu to Tanjung Priok, Indonesia, for arrival around Nov. 20. A 1,000-ton parcel was heard for Yeosu to Ho Chi Minh, Vietnam, for arrival at discharge port around Nov. 25-Dec. 10. Lastly, a 1,500-ton cargo was likely to be shipped from Ulsan to Hai Phong, Vietnam, around Oct. 25-30.

November ICE Brent Singapore futures were trading at $48.32 per barrel in afternoon trading on Oct. 20, compared to $50.29 per barrel on Oct. 13.

Gabriela Wheeler can be reached directly

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