Asia Base Oil Price Report


Macroeconomic concerns, plunging crude oil prices and lack of confidence in a short-term recovery are largely keeping Asian base oil buyers from trading.

Suppliers characterized the market as quiet, because buyers are maintaining a cautious attitude and prefer to wait as long as possible to secure cargoes, given the possibility that prices may continue to fall.

Base stock prices remain under pressure, and it is difficult to determine when the bottom will be reached, participants said.

A majority of purchases are limited to small cargoes to avoid carrying high inventories. Consumers are buying what they require, not more than that, a seller explained, and mentioned that there had not yet been an uptick in demand as expected ahead of the Lunar New Year holiday in early February.

Producers are now hoping that requirements improve after the holiday instead – in mid-February or early March – as this is the time the spring manufacturing season gets underway and consumers need to pad inventories.

Given that demand from downstream lubricant markets has remained rather lackluster and supplies are ample, there has been speculation that operating rates at base oil facilities have been cut back, but it was difficult to ascertain if this was the case.

Sources estimated that most plants must be running at optimum rates, meaning that producers have to continue manufacturing base oils because they cannot easily alter running rates, but that they also need to optimize operating costs. This may entail trimming rates to a certain extent.

Suppliers are also striving to protect market share given current oversupply conditions, and as a result, most base oil grades remain under downward price pressure.

Some of the price competition has been prompted by a displacement of API Group I requirements by Group II products, as prices of the higher-performance oils have fallen and the gap between the two categories has been compressed.

For example, drops in API Group II 500 neutral pricing on the back of lower offers and falling crude oil prices have spurred adjustments in Group I solvent neutral 500 values as well. Spot offers for SN500 were heard at between $450 per metric ton and $470/t FOB Asia for late January and early February lifting, but buying ideas were closer to $430/t-$440/t FOB. Prices for Group II 500N have also softened to $520-$540/t FOB from $530-$550/t the previous week.

Also within the Group I tier, bright stock is expected to be exposed to downward pressure in the coming month as availability remains plentiful and activity in the industrial segment, which is one of the applications which draws large quantities of bright stock, will likely slow during the upcoming holiday.

Buying interest for imports in key markets such as China has declined given uncertain consumption prospects for base oils before and after the Lunar New Year, exacerbated by financial turbulence and volatile crude oil and feedstock prices.

Likewise, in India, appetite for imports has been tempered by ample local supply and a limited number of offers for Iranian and Russian material. Prices remain largely flat as few transactions were concluded during the week. Buying and selling ideas, which were largely based on published price ranges recognized as benchmarks, were mentioned in a $450-$470/t CFR India range for SN150 and at $460-$480/t CFR India for SN500. For Group II cuts, indications were heard at $470-$490/t CFR India for 150N and at $560-$590/t CFR for 500N.

Base oil price assessments in Asia were stable-to-soft this week, as some grades saw little activity and therefore few changes, and others were discussed at lower levels.

Within the Group I category, SN150 was unchanged at $540/t-$570/t ex-tank Singapore, while SN500 was heard at $610/t-$630/t. Bright stock was assessed at $1,000/t-$1,020/t.

Group II 150N was largely holding at $510/t-$530/t ex-tank Singapore, while the 500N was gauged at $660/t-$680/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed lower by $10/t at $430/t-$460/t, while SN500 was also lower by $10-$20/ton at $440/t-$470/t FOB. Bright stock prices were also lower by $10/t at $900/t-$920/t FOB.

In the Group II category, prices for 150N were unchanged at $420/t-$450/t FOB Asia, while 500N was assessed down $10/t at $520/t-$540/t FOB Asia.

The 4 centiStoke and 6 cSt oils in the Group III segment were assessed at $860/t-$890/t FOB Asia, while the 8 cSt grade was steady at $610/t-$630/t FOB Asia.

Upstream, crude oil futures have traded at the lowest levels since 2003 this week, as investors worried that global oversupply is combining with slowing demand due to economic weakness, especially in China. Oil producers continue to pump between 1 million and 2 million barrels of crude every day in excess of demand, creating an abundance of stored oil, and Iran’s return to the market will only add to the glut, Reuters reported.

Brent futures have lost 26 percent in January-nearly the biggest monthly fall since 2008. March ICE Brent Singapore futures were trading at $31.06 per barrel in afternoon sessions on Jan. 21, compared to $29.21 per bbl for February futures on Jan. 21.

In terms of shipping, there was a surprising flurry of inquiries to move base oils from South Korea and Japan this week. A 2,000-metric ton cargo was quoted for Yeosu, South Korea, to Taichung, Taiwan, for Jan. 30 – Feb. 3 shipment. A 3,500-ton lot was heard for Yeosu to Nantong, China, for Feb. 11-15 lifting. A 1,500-ton parcel was on the table for Yeosu to Jiangyin, China, for Feb. 11-20 shipment.

A 400-ton cargo of 600N was mentioned for Yeosu to Taichung, Taiwan, for Feb. 1-15 lifting. A 1,000-ton lot was expected to cover Yeosu to Ho Chi Minh, Vietnam, for shipment between Feb. 1-15. A 1,800-ton cargo was quoted for Yeosu to Tanjung Priok, Indonesia, also for Feb. 1-15 lifting.

A 1,600-ton cargo was heard for Onsan, South Korea, to Singapore for shipment between Feb. 5-7. A 2,200-ton lot was also discussed for Onsan to Dongguan, China, and Shuidong, China, for Feb. 10-14 lifting. A 3,000-ton parcel of 150N was expected to be shipped from Daesan, South Korea, to Tianjin, China, in the second half of February.

In Japan, a 2,000-ton cargo was being worked on for Yokkaichi to Manila, Philippines, forJan. 25-Feb.5 shipment, requiring a Ship Inspection Report (SIRE). A 2,000-ton lot was also mentioned for Mizushima to Singapore for prompt shipment, also requiring SIRE. Lastly, a 2,500-ton cargo was on the table for Mizushima and Kainan to Singaporefor Jan. 25-Feb.5, also requiring SIRE.

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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