Base oil market participants focused on finalizing business for the year, while January spot shipment negotiations appeared tempered by a cautious outlook and downward price pressure.
This week, further price markdowns were communicated to customers in Asia. According to sources, a major Southeast Asia producer has lowered its API Group II list prices, the second such move in a month.
It was heard that the refiner decreased the list price for its neutral 150 by U.S. $20 per metric ton, and its 500N cut was slashed $40/t, with these adjustments going into effect on Dec. 18.
In similar fashion, the producer had previously trimmed its Group II 150N list price $20/t, while its 500N was cut by $40/t on Dec. 2. There was no producer confirmation forthcoming about the price revisions.
The adjustments were a reflection of current market conditions, which continued to exert pressure on base stock values.
Most players agreed that the last quarter of the year has been difficult in terms of planning, as theyve faced challenging market fundamentals such as volatile crude and feedstock numbers, declining demand, and growing supply.
As a result of the ever-changing conditions, buyers maintained a prudent attitude and limited purchases to smaller spot cargoes, so as to minimize possible price risks.
A number of contract customers also lowered the volumes of base oils taken during the last couple of months because of weak lubricant demand, which coincided with suppliers’ drive to lower inventories ahead of closing their books.
These conditions, together with plummeting crude oil values and abundant supply of most base oil grades, resulted in significant price erosion throughout the quarter.
Prices of Group I solvent neutral 150 started October at around $500/t-$540/t FOB Asia, and dropped to around $460/t-$490/t FOB towards the end of the fourth quarter.
The SN500 cut underwent slightly larger downward adjustments given weaker demand of the heavy-viscosity grades during the winter season. Values were assessed at $600/t-$620/t FOB Asia on October 6, and were heard at $540/t-$560/t FOB in late December.
Within the Group II segment, heavy-vis prices suffered the most downward pressure as supply outstripped demand for most of the quarter, and demand also declined.
Prices of Group II 150N were assessed at $500/t-$520/t FOB Asia in early October, but receded to $440/t-$460/t FOB Asia in late December. The heavy-vis 500N was hovering at $690/t-$710/t FOB Asia in October and plummeted to $550/t-$580/t FOB Asia in December.
In China, there was a glimmer of increased activity as some importers sought to secure January cargoes on concerns that prices may go up as demand picks up ahead of the Lunar New Year celebrations starting Feb. 8.
End-users, on the other hand, expected prices to remain under pressure as it was unclear whether requirements from downstream applications would improve, and were therefore hesitant to secure additional volumes.
Spot prices in the Asian market were largely assessed stable-to-soft this week because some indications underwent reductions on lower buying and selling ideas against thin trading.
On an ex-tank Singapore basis, Group I prices were unchanged at $540/t-$570/t for SN150, and at $620/t-$640/t for SN500. Bright stock was steady at $970/t-$990/t.
Group II 150N values were revised down $10/t to $520/t-$540/t ex-tank Singapore, while the 500N was also down $10/t at $650/t-$670/t ex-tank.
On an FOB Asia basis, Group I SN150 was holding at $460/t-$490/t, and SN500 at $540/t-$560/t FOB. Bright stock prices were heard at $920/t-$950/t FOB, unchanged week on week.
In the Group II category, prices for 150N were assessed down $10/t at $440/t-$460/t FOB Asia, while 500N was also lower by $10/t at $550/t-$580/t FOB Asia.
The 4 centiStoke and 6 cSt oils in the Group III segment were unchanged at $870/t-$900/t FOB Asia, while the 8 cSt grade was gauged at $630/t-$650/t FOB Asia, but discussions for these cuts were subdued.
Upstream, crude oil prices fell on Dec. 17 on data showing an unexpected climb in U.S. crude supplies and strength in the dollar following the Federal Reserves decision to hike interest rates. West Texas Intermediate (WTI) prices dropped below $35 per barrel, while Brent was trading close to 11-year lows.
February ICE Brent Singapore futures were hovering at $37.09 per bbl in afternoon sessions on Dec. 17, compared to $37.83 per bbl. for January futures on Dec. 14.
On the shipping front, a good number of inquiries were still being floated, with operators hoping to fill remaining space for the year, and continuing to book January positions. In South Korea, a 2,000-metric ton base oil cargo was still on the table for Onsan to Tianjin, China, for Dec. 22-25 loading. A 1,400-ton lot was also heard for Onsan to Jingjiang, China, for prompt December dates. A 5,000-ton to 10,000-ton parcel was being discussed for Onsan to Antwerp, Belgium, for second half of January loading.
A 1,000-ton cargo of 150N was quoted for Daesan, South Korea, to Bayuquan, China, for the earliest laycan within December.
A 1,000-ton parcel was also heard for Ulsan, South Korea, to Taichung, Taiwan, for Dec. 25-30 shipment.
A 2,000-ton lot made up of two grades (no heating) emerged for Yeosu, South Korea, to Nantong, China, for Dec. 21-26 loading. A 2,500-ton cargo composed of 1,200 tons of 600N and 1,300 tons of 150N was expected to be shipped from Yeosu to Sriracha, Thailand, between Dec. 15-30. A 1,000-ton lot was also on the table for Yeosu to Xiaohudao, China, for end of December dates.
In Japan, a 4,500-ton lot was being discussed for Mizushima to Singapore and Port Klang, Malaysia, for end of December and early January dates, requiring shipping inspection report (SIRE). A 2,000-ton cargo was also seen for Mizushima to Hong Kong for Jan. 3-7 lifting, also requiring SIRE.
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com