Asia Base Oil Price Report


Sentiment in Asia was downbeat as trading on the Chinese stock market was suspended twice during the week on sharp drops in equities and 11-year lows in crude oil prices.

While base oil producers would generally benefit from lower crude oil values if base stock prices were maintained at reasonable levels, the recent decline in oil prices, combined with base oil oversupply and lackluster demand have led to a persistent downtrend in numbers amid squeezed margins. “After the recent decreases, margins are quite low,” a supplier commented.

Concerns over the health of the Chinese economy deepened after negative manufacturing data was released on Jan. 4. This led to a steep drop in Chinese shares, which resulted in the temporary suspension of trading that day, and then again on Jan. 7.

China’s stock trading was halted after the CSI 300 tumbled more than 7 percent in early trade on Thursday, triggering the market’s circuit breaker for a second time in the week, CNBC reported on its website.

The CSI 300 (the benchmark index against which China’s new circuit breakers are set) plummeted 7.2 percent. If that index rises or falls 5 percent, the market halts all trade for 15 minutes, and trading is suspended for the rest of the day if the index falls by 7 percent.

The turmoil in China also led to drops in stock markets across Asia, which were already jittery on concerns over China’s currency fluctuations and economic slowdown, as well as falling oil prices amid a global supply glut.

Crude prices steadied on Thursday after falling to 11-year lows on news about China. Both West Texas Intermediate (WTI) and Brent futures tumbled to below $33 per barrel on the heels of the plunge in the Chinese stock market, but recovered some territory as the dollar weakened and traders who had bet on lower prices closed out their positions.

February ICE Brent Singapore futures were trading at $32.62 per barrel in afternoon sessions on Jan. 7, compared to $37.22 per bbl. on Dec. 30.

Base oil producers have been focusing efforts in maintaining and protecting market share and have had to adjust prices down repeatedly over the last few months.

A major Southeast Asian refiner cut ex-tank Singapore list prices twice in December, yielding combined reductions of U.S. dollar $40 per metric ton for its Group II 150 neutral and $80/t for its 500N.

Also within the Group II tier, it was heard that Taiwanese producer Formosa Petrochemical decreased its domestic list prices for January shipments of base oils, after adjusting them down in December as well.

The supplier lowered its 70N list price by Taiwan New Dollar (TWD) 0.92 per liter, its 150N by TWD 0.62/liter, and its 500N by TWD 1.12/liter, according to sources (1 TWD = $U.S. 0.0300835 on Jan. 7).

The decreases were thought to be a means of remaining competitive against imports, although Taiwanese buyers generally prefer to secure locally produced material as it is less risky because cargoes can be delivered faster.

In India, local producers have also marked down list prices on API Group I oils for January, with SN70 and SN150 moving down Indian Rupees 0.60/liter and SN500 dropping Rs 3.10/liter. The price of bright stock was also reduced by Rs 2.60/liter from December levels (1 rupee = U.S. $0.0150232on Jan. 7).

Asian buyers are generally maintaining their stance of only acquiring small cargoes given the possibility that prices could continue to decline, as there is no clear indication whether the bottom has been reached.

A good number of consumers are only taking volumes as stipulated under contract and are staying away from the spot market, leading to very thin trading during the week.

Base oil prices in Asia were notionally assessed as stable to soft on current discussions amid subdued buying interest.

Within the Group I category, solvent neutral 150 was steady at $540/t-$570/t ex-tank Singapore, and SN500 at $620/t-$640/t. Bright stock was unchanged at $970/t-$990/t.

Group II 150N values were heard at $510/t-$530/t ex-tank Singapore, while the 500N was hovering at $640/t-$660/t ex-tank.

On an FOB Asia basis, Group I SN150 was holding at $460/t-$490/t, and SN500 dropped $40/t to $500/t-$520/t FOB. Bright stock prices were slightly lower by $10/t-$20/t at $910/t-$930/t FOB.

In the Group II category, prices for 150N were unchanged at $440/t-$460/t FOB Asia, while 500N was assessed lower by $20/t-$30/t at $530/t-$550/t FOB Asia.

The 4 centiStoke and 6 cSt oils in the Group III segment were assessed lower at $850/t-$880/t FOB Asia, while the 8 cSt grade was gauged at $610/t-$630/t FOB Asia.

Shipping activity received a boost from fresh interest to move base oils-(mostly ex-South Korea) to several destinations in Asia, and there were also three Contracts of Affreightment (COA) quoted. A 2,000-metric ton cargo was mentioned for Onsan, South Korea, to Godau, Vietnam, for January dates and estimated arrival no later than Jan. 20.

A 600-ton or 1,000-ton lot was also expected to cover Onsan to Nha Be, Vietnam, in January. A 2,450-ton cargo of three grades was mentioned for Ulsan, South Korea, to Tanjung Priok, Indonesia, for Jan. 20-30 lifting. A 1,500-ton parcel was expected to be shipped from Yeosu, Korea, to Maoming, China, between Jan. 21-27. A 4,000-ton lot of four grades was heard for Yeosu to Nantong, China, for Jan. 15-21 lifting. A 1,500-ton cargo was being worked on for Yeosu to Jiangyin, China, for Jan. 16-25 shipment.

Three COAs were on the table as well: one for approximately 2,000 tons to cover Yeosu to Merak, Indonesia; a second 2,000 tons for Yeosu to Tanjung Priok, Indonesia, and a third for about 1,000 tons for Yeosu to Vietnam.

Gabriela Wheeler can be reached directly

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.

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