Tepid demand and ample supply continue to exert pressure on base oil prices, with suppliers seeking potential outlets for their products – both within Asia and in other regions.
Requirements from the lubricants segment have shown little improvement over the last few weeks, and participants expect minimal changes before the start of the new year. With prices having moved down steadily since August, some opportunities to place molecules outside of Asia have presented themselves, sources said.
At least a couple of API Group II cargoes were heard to have been shipped from South Korea to the United States. While prices in the U.S. had been hovering at higher levels than in Asia, the situation appears to be shifting as base oil postings in the U.S. have also moved down, limiting the arbitrage opportunities.
It was also heard that several Group II and III cargoes had been sold from Northeast Asia to India at very competitive levels.
There has been concern that new product coming on stream imminently could exert more pressure on these segments in Asia. The new Abu Dhabi National Oil Co. (Adnoc) base oil plant located in Ruwais, United Arab Emirates, is anticipated to start producing commercial base oils in late December or the first quarter of 2016. The plant will have the capacity to produce 620,000 metric tons per year of Group II/III base oils (approximately 500,000 tons of Group III base oil and 120,000 tons of Group II).
Meanwhile, both suppliers and consumers in Asia are striving to draw down inventories before the year-end due to tax implications, and this condition is expected to be more pronounced in December.
Suppliers have tried to foster sales by adjusting down offer levels, but buyers are holding off on purchases in hopes of achieving even lower prices in coming weeks.
A drop in crude oil prices also added to the general downtrend in base oil pricing. Crude futures tumbled to two-month lows as U.S. stockpiles continued to mount, and there was ongoing concern that OPEC oil producing countries would maintain their current output rates, exacerbating a global supply glut.
December ICE Brent Singapore futures were trading at $45.79 per barrel in afternoon trading on Nov. 12, compared to $47.59 per barrel on Nov. 9.
In Taiwan, Formosa was heard to have decreased its domestic base oil prices for November shipment. According to sources, the producer’s Group II 70 neutral and its 150N were lowered by Taiwan New Dollars 0.25 per liter (U.S. 1 cent), while its 500N was reduced by TWD 0.96/liter.
There have also been offers of South Korean material into Taiwan, but these encountered lukewarm buying interest, as domestic prices are deemed more attractive and delivery times are shorter, sources noted.
Offers of South Korean Group II 150N were heard at around U.S. dollars $520 per metric ton CFR Taiwan, while the 500N cut was mentioned at $640/t-$650/ton FOB Korea.
As a result of discussions taking place at lower levels this week, Asian spot prices have been revised from the previous week’s indications.
On an ex-tank Singapore basis, Group I SN150 prices were assessed lower by $10/ton at $550/t-$570/t, while SN500 was heard at $630/t-$650/t, reflecting a $10/t drop. Bright stock was heard at $970/t-$990/t.
Group II 150N values were unchanged at $540/t-$560/t ex-tank Singapore, while the 500N cut was assessed down $10/t at $680/t-$700/t.
On an FOB Asia basis, Group I SN150 was holding at $480/t-$510/t, SN500 at $570/t-$590/t FOB, and bright stock was unchanged at $910/t-$940/t FOB.
In the Group II segment, prices for 150N were assessed down $10/ton at $480/t-$510/t FOB Asia, while 500N was steady at $640/t-$660/t FOB Asia.
The Group III cuts seemed to be less exposed to downward pressure because of the limited number of market players that are active in this segment. Nevertheless, the 4 centiStoke and 6 cSt oils were adjusted down to $870/t-$900/t FOB Asia, while the 8 cSt grade was heard at $640/t-$660/t FOB Asia, reflecting a $10/t drop.
Shipping activity was fairly brisk, with several inquiries to move product from South Korea making their usual appearance this week. A 3,500-metric ton cargo was expected to be shipped from Ulsan to Taichung and Mailiao, Taiwan, between Nov. 23-28. A 1,000-ton lot was also quoted for Ulsan to Taichung for Nov. 23-27 dates. A 500-ton parcel was heard for Yeosu to Singapore for second half of November shipment and delivery after Dec. 7.
A 2,000-ton lot was likely to cover Yeosu to Tianjin, China, with Nov. 16-28 shipment dates. A 2,000-ton lot made up of 1,000 tons of 150N and 1,000 tons of 600N was expected to be shipped from Yeosu to Jiangyin, China, between Nov. 22-30. A 500-ton cargo was being worked on for Yeosu to Singapore for second half of November lifting. A 1,600-ton lot made up of 600 tons 150N and 1,000 tons of 600N was likely to cover Yeosu to Tanjung Priok, Indonesia, in first half of December. A 1,500-ton lot was also quoted for Yeosu to Merak, Indonesia, for Dec. 1-10 shipment. A 2,000-ton cargo of three grades was on the table for Onsan to Sri Lanka for Nov. 25-30 lifting.
Lastly, a 2,000-ton cargo was expected to be shipped from Mizushima, Japan, to Hong Kong between Dec. 5-9.
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com