Asia Base Oil Price Report


Base oil trading in Asia was generally subdued as buyers and sellers were trying to find their bearings in an ever-changing market.

Given uncertainties surrounding crude oil and feedstock prices, participants hesitated to commit to deals because it was unclear what direction prices would be heading.

On the one hand, the end of the year is fast approaching and both suppliers and consumers strive to lower inventories ahead of the end of December.

Buyers were heard to be securing small cargoes to run day-to-day operations, and aside from avoiding a product build-up, they were also avoiding the risk of purchasing material that may prove to be too expensive if prices continue to decline.

In China, the volume of imported product has dwindled in the last couple of months due to lackluster buying appetite. There are reports that Russian Group I import volumes, for instance, decreased significantly in September and October.

In addition, Group II spot cargoes from Taiwanese producer Formosa Petrochemical going into China are also substantially down in October, although contract cargoes have remained stable. Aside from tepid buying interest in China, the reduction is partly attributed to Formosa’s limited spot availability.

There has been a slight tightening of the light-viscosity grades, both within the API Group I and II categories, given that blenders are utilizing the lighter cuts in their winter applications and demand for these cuts has improved.

However, the tighter conditions do not seem to lend enough support for an upward movement of prices at the moment, although they could help values stabilize, suppliers said.

Base oil prices have weakened steadily since the end of July and trying to implement any increases during the last quarter is uncommon, particularly as crude oil prices remain volatile this year, sources added. Prices of the Group II 500 neutral were hovering at $730/t-$755/t FOB Asia at the end of July, and are currently assessed at $680/t-$700/t FOB Asia.

Interestingly, while base oil prices have seen values lose ground over the last several months in most Asian economies, prices in Japan have moved up, according to sources.

This is because Japanese producers such as JX Nippon calculate their quarterly base oil prices on a formula that takes into account the price of imported crude oil (JCC or Japanese Crude Cocktail, a commonly used reference price index published monthly by the Japanese government representing the average crude oil import price into Japan). There is typically a time lag of three to four months between feedstock movements and base oil adjustments, sources explained.

As a result, Japanese participants expect base oil prices to decline in the first quarter of 2016, based on expected JCC calculations so far. South Korean producer S-Oil also follows the trend set by Japanese producers, and sells base stock into Japan on a similar formula.

The different base oil suppliers raised base oil prices for the October-December period, with the amounts varying according to the producer. JX Nippon was heard to have moved up prices by 10.3 yen per liter, Cosmo Oil by 12 yen/liter, and Idemitsu by 8.1 yen/liter. Imports from South Korean producers SK and S-Oil went up by 5.2 yen/liter, according to sources. These price increases could not be confirmed with the producers.

It was heard that Japanese refiners have also started to raise retail prices for fuel products such as gasoline and diesel in recent weeks.

Conversely, domestic lubricant prices were understood to have decreased in recent months, with Idemitsu lowering their whole sale prices by 7 yen/liter in Sep., 10 yen/liter in Oct., and 3 yen/lit for Nov. sales.

Given thin activity in the Asian market this week, price assessments were generally unchanged week on week.

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

Group II 150N values were holding at $560/t-$580/t ex-tank Singapore, while the 500N cut was assessed at $740/t-$760/t.

On an FOB Asia basis, Group I SN150 was unchanged 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 assessed at $490/t-$520/t FOB Asia, while 500N was heard at $680/t-$700/t FOB Asia.

In the Group III segment, participants were slightly puzzled because prices have seen little change in recent weeks, despite the downward adjustments for other cuts. 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.

On the shipping front, there was the usual interest to move cargoes ex-South Korea. A 1,000-metric ton lot was quoted for Onsan to Taichung, Taiwan, for Oct. 29-Nov. 2 shipment. A second parcel of 2,000 tons was also being discussed for Yeosu to Taichung for late Oct/Nov. 10 shipment. A 600-ton lot of 600N was on the table for Yeosu to Taichung for Nov. lifting. A 1,000-ton parcel was expected to be shipped from Yeosu to Merak, Indonesia, between Nov. 12-20. A 1,000-ton cargo was also quoted for Yeosu to Ho Chi Minh, Vietnam, for discharge around Nov. 25-Dec. 10. A 2,700-ton parcel was likely to ship from Yeosu to Chennai, India, between Nov. 13-25. A 1,700-ton lot was being worked on for Yeosu to Tanjung Priok, Indonesia, for Nov. dates and delivery after Nov. 20.

In Japan, a 2,500-ton cargo was expected to be shipped from Mizushima to Singapore end Oct./early Nov.

December ICE Brent Singapore futures were trading at $48.03 per barrel in afternoon trading on Oct. 26, compared to $48.32 per barrel on Oct. 20.

Gabriela Wheeler can be reached directly

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