Asian base oil prices were stable to firm as product tightness and steep feedstock values offered base oil suppliers some opportunities to mark up spot indications.
Given the ongoing turnaround at a major API Group II producers base oil plant and the generally lean inventories held by a majority of suppliers in Asia, base oil prices continued to be exposed to upward pressure.
Taiwanese producer Formosa Petrochemical embarked on a two-month turnaround at its 600,000 metric tons per year Group II plant in Mailiao, Taiwan. The effects of the shutdown have been felt over the last three months because Formosa started to limit spot availability from its plant in order to build inventories and continue supplying its contract customers to the best of its ability.
This situation led to a tightening of regional spot supply, although the import of large quantities of Group II material – largely from the United States, Europe and the Middle East – offered some relief in countries such as China and India.
Nevertheless, general availability of heavy viscosity grades remains thin, and this has led regional suppliers to increase offer levels for export purposes as well as for domestic business.
In Taiwan, it was heard that Formosa had increased its list prices for domestic transactions as of July 1, driven by the overall tight supply conditions in the region and fairly stable demand levels.
According to sources, the producer lifted its Group II 70 neutral grade by New Taiwan Dollar 1.18 per liter, while its 150N cut was raised NT$0.18/l. As for the heavy vis cut, the 500N was increased NT$0.26/l for July transactions.
The increases were more moderate than those seen in June, which lifted the 70N and 150N cuts by NT$1.42/l, and the 500N cut NT$2.26/l.
Group II availability remained snug throughout the region, leading other suppliers to raise spot prices by around $10 per metric ton week on week.
However, trading has been slightly less vigorous than a month ago, given festivities on July 5 through July 7 to mark Eid al-Fitr – the end of the Ramadan period – in many countries of the region, along with the start of a slowdown in demand from the lubricants segment in key markets such as China.
Base oil activity picked up the pace slightly towards the end of the week, but there were few spot transactions reported. Price assessments were adjusted to reflect current discussion levels.
On an ex-tank Singapore basis, the Group I solvent neutral 150 grade was stable at $530/t-$550/t. The SN500 was also unchanged from the previous week at $640/t-$660/t, while bright stock was holding at $1,030/t-$1,050/t.
The Group II 150N was steady at $570/t-$600/t, and the 500N was up by $10/t at $760/t-$770/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed at $450/t-$470/t; the SN500 was up by $10/t at $620/t-$640/t FOB. Bright stock was steady at $940/t-$960/t FOB.
In the Group II category, the 150N cut moved up by $10/t at $550/t-$570/t FOB Asia, while the 500N/600N was also higher by $10/t at $720/t-$740/t FOB Asia.
There were no price changes seen in the Group III tier, with the 4 centiStoke and 6 cSt oils assessed at $860/t-$890/t FOB Asia, and the 8 cSt grade at $610/t-$630/t FOB Asia.
Upstream, Brent crude oil futures continued to hover close to $49-$50 per barrel, with values plunging nearly 5 percent during the week after the U.S. government reported a weekly crude inventory draw that was smaller than analysts had predicted.
ICE Brent Singapore September futures closed at $46.11 per bbl in afternoon sessions on July 11, compared to $50.46 per bbl on July 4.
In market-related news, Saudi Aramco has exited a joint venture with Thailands state-owned PTT, which intended to set up the Victory refinery in Vietnam’s Binh Dinh province, media reports said. Saudi Aramco and PTT had jointly submitted the projects feasibility study to the Vietnamese government in 2014.
The companies sought to partner with a Vietnamese company to develop the crude oil, refined products and petrochemical complex, but had been unsuccessful-which is likely to be one of the reasons for Saudi Aramco’s decision to withdraw from the project.
Media sources reported that Saudi Aramco may be more interested in developing projects in Indonesia instead. In May, Saudi Aramco and Indonesias Pertamina jointly awarded an engineering and project management services contract to Amec Foster Wheeler Energy for an upgrade of the Cilacap refinery in Java, Indonesia, to raise total nameplate processing capacity to 370,000 barrels per day from the existing 348,000 b/d.
There were also reports that Pertamina stared discussions with Saudi Aramco for the upgrade and expansion of the 170,000 b/d Dumai refinery in central Sumatra.
Pertamina operates a 449,000 t/y Group I base oils plant in Cilacap and a joint venture plant with SK Lubricants in Dumai, which can produce 487,000 t/y of Group III oils, according to LubesnGreases Guide to Global Base Oil Refining.
Aside from increasing crude oil processing capacity at Cilacap, the project would enable the refinery to raise production of gasoline and diesel volumes that meet more stringent emissions standards, improve the quality of base oils produced at the plant, and expand output of aromatics and polymers.
Engineering, procurement, and construction activities are scheduled to start in 2019 and the entirety of Cilacaps upgrade is expected to be completed by the end of 2022, according to Oil and Gas Journal.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LNG Publishing shall not be liable for commercial decisions based on the contents of this report.