Base oil prices were stable to firm in Asia on the back of snug supply and ongoing plant turnarounds, although the trading pace was somewhat muted due to the absence of players who were attending industry events.
The ICIS Asian Base Oils and Lubricants Conference in Singapore on May 16-18, and the Asia Petrochemical Industry Conference in Sapporo, Japan, on May 18-19 were expected to draw a large number of buyers and sellers away from the market.
There continued to be reports of limited availability of certain base oil grades due to recent and ongoing maintenance turnarounds, with supply of API Group II cuts said to be particularly strained.
Group III products have also tightened since the end of last year because of an unexpected shutdown at the Shell-Qatar Petroleum Pearl gas-to-liquids plant in Ras Laffan, Qatar. Base oils from the plant are typically exported to many locations outside the Middle East, including several destinations in Asia.
Plant operators reported that the plant was in the process of resuming production, with production expected to ramp up through the second quarter. The GTL plant has capacity to make 1 million metric tons per year of Group III, according to LubesnGreases Guide to Global Base Oil Refining.
Another turnaround will be commencing in South Korea in June. SK Lubricants has scheduled a three-week shutdown at its Group II/III plant in Ulsan starting early next month. The unit has capacity of 701,000 t/y Group II and 1.3 million t/y Group III base oils.
The situation was said to be slightly different in China, where importers and consumers were heard to be holding comfortable levels of inventory. Supply of some cuts was said to be ample because many buyers secured cargoes in the previous months due to concerns that the busy maintenance schedule in Asia might cause shortages.
Group I cargoes have also been moving into China from Europe, with at least two Russian tenders offered in May and a couple of cargoes shipped to China in April – an increase from March levels when less material from Russia had been available.
Taiwanese producer Formosa Petrochemical was anticipated to ship greater Group II quantities to China in May than in previous months as it has been able to rebuild its inventory. Furthermore, a number of Chinese plants that have been undergoing turnarounds have just come back on stream, or will be restarting soon. Such is the case of Sinopecs Group I/II base oil plant in Jinan, which has capacity to make 51,000 t/y Group I and 150,000 t/y Group II. That plant was shut down in mid-February for a maintenance program and resumed output at the end of April.
Sinopec was reportedly scheduled to restart its 400,000 t/y Group II/III unit in Maoming this month after completion of a routine maintenance program. No producer confirmation could be obtained about the restart of these plants.
Meanwhile, demand from some of downstream lubricant sectors has started to soften in China, particularly the industrial and marine segments, a situation that also contributed to a lengthening of availability.
Market participants are keeping an eye on the Chinese automotive industry as well, because of predictions that demand for automobiles will be less vigorous this year – which, in turn, could translate into reduced base oil and lubricant requirements.
Global prospects for the automobile industry are less positive than a year ago, sources said. Japanese car maker Toyota Motors, for example, posted weaker-than-expected full year results this week, warning that profits are likely to fall again in the current fiscal year owing to costly U.S. customer incentives and a strengthening of the yen, according to the Shanghai Daily.
Although a few pockets of the base oil market are slowing, spot prices in Asia remained exposed to upward pressure on account of the tight supply and demand scenario, which was not expected to ease for a couple of months given the numerous turnarounds that have recently taken place.
On an ex-tank Singapore basis, Group I solvent neutral 150 was unchanged at $700/t-$720/t, SN500 was up by $20/t at $860/t-$880/t, and bright stock was heard at $960/t-$980/t. Group II 150 neutral was hovering at $710/t-$730/t, and 500N was heard at $910/t-$930/t, again ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was steady at $570/t-$590/t, and SN500 was assessed at $770/t-$790/t FOB. Bright stock was up by $10/t at $820/t-$840/t.
Group II base oils were steady at $630/t-$650/t for 150N and $830/t-$850/t for 500N/600N. In the Group III segment, 4 centiStoke and 6 cSt oils were unchanged at $770/t-$790/t, while 8 cSt was higher by $10/t at $750/t-$770/t, all FOB Asia.
Upstream, crude oil futures rose from a week ago as OPEC members announced that they had reached a consensus to extend until 2017 an agreement to curb production.The announcement came on the heels of reports showing a larger than expected draw in U.S. crude oil inventories.
ICE Brent Singapore July futures settled at $52.15 per barrel on May 15, up from $49.48/bbl on May 8.
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.