Asia Base Oil Price Report

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A tightening supply scenario, together with improving demand and firm crude oil prices, has triggered upward spot price movements in Asia.

With a number of maintenance turnarounds on the horizon, buyers are concerned about a possible shortage of certain grades as the spring production season gets underway, and base oil orders are likely to increase during the next few weeks.

Aside from the plant shutdowns discussed earlier in the month, additional information has emerged about upcoming turnarounds.

Several Asian base oil units appear to be scheduled for maintenance in coming months – a higher number than usual, but that may be due to the small number of events in 2016. Many of these units are taken off-line every two years, sources said, and therefore several are due for maintenance this year.

According to sources, Idemitsu Kosan, JX Nippon and Cosmo Oil are all scheduled to temporarily close plants in Japan during the March-August timeframe. Idemitsu Kosan’s plant in Chiba can produce 123,000 metric tons per year of Group I and 138,000 t/y of Group II base oils, according to LubesnGreases Global Guide to Base Oil Refining,” and was anticipated to be taken offline for sixty days, starting in April.

JX Nippons 209,000 t/y Group I plant in Mizushima was said to be preparing to close for two and a half months beginning in early May. The company also operates a second 183,000 t/y base oil plant in Mizushima, which will apparently not be shut down. Cosmo Oil was understood to be planning to shut down its 119,000 t/y Group I plant in Yokkaichi in June for a two-month turnaround.

None of these refiners confirmed these schedules.

The additional turnaround news came on the back of reports that ExxonMobil would be shutting down its API Group II base oils plant in Jurong, Singapore, for slightly over a month, starting this week. The unit has capacity to produce more than 1.5 million metric tons of base stock per year.

Additionally, South Korean producer GS Caltex is reportedly preparing to shut down its base oils unit in Yeosu for maintenance in March. The facility can produce more than 1.1 million t/y of Group II oils and 146,000 t/y of Group III base oils.

Sources said Sinopec Maomings Group II/III base oil trains in Guangdong province will be taken off-line for a month in mid-March.

That plant can produce 100,000 t/y of Group II and 300,000 t/y of Group III oils. The producer’s Group I unit at the site was understood to be exempted from the turnaround.

There were reports that some grades have already started to show reduced availability for spot transactions in Asia as producers were likely to restrict spot sales in order to build inventories and meet contractual obligations. Lots of talk centered on the tightening conditions and firm crude oil values, which offered additional support to the higher spot export offers.

On a local level, suppliers have started to implement increases for domestic transactions as well. In Taiwan, it was heard that base oil producer Formosa Petrochemical would be raising list prices on all Group II grades for March transactions.

Formosa Petrochemicals Group II 70 neutral was expected to be lifted by 0.43 new Taiwan dollars per liter and its 150N grade by NT$1.03/l. The producer’s heavy-viscosity 500N cut will be going up by NT$0.21/l. These hikes come on the heels of two rounds of increases in February, one initiated at the beginning of the month and one mid-month.

Asia base oil price assessments were again stable to firm this week, as some spot ranges moved up, while others were unchanged since last weeks adjustments, depending on availability and buying interest.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was assessed unchanged at $610/t-$630/t, SN500 was $700/t-$725/t, and bright stock was also steady at $925/t-$945/t. These prices underwent upward revisions the previous week.

Group II 150 neutral was up $10/t to $630/t-$650/t, and 500N was also up by $10/t, at $805/t-$825/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 moved up $10/t to $510/t-$530/t, while SN500 also rose $10/t to $620/t-$630/t FOB. Bright stock was unchanged this week at $860/t-$880/t FOB.

Within the Group II category, 150N was heard to be up by $10/t at $540/t-$560/t, while 500N and 600N rose the same amount to $730/t-$750/t – all FOB Asia.

In the Group III segment, 4 centiStoke and 6 cSt oils were assessed stable at $730/t-$760/t, and 8 cSt was $655/t-$675/t, all FOB Asia, but these grades were said to be exposed to upward pressure on account of tightening supplies, particularly in the Middle East, following months of oversupply conditions.

Upstream, crude oil values climbed Monday on investors confidence that prices will likely rise further as OPEC and non-OPEC members stick to their output cut agreement. However, gains were capped by the prospect of faster growth in U.S. oil output as idle shale production is being brought back on stream given the incentive of higher values.

ICE Brent Singapore April futures settled at $56.63 per barrel on Feb. 27, compared to $56.14/bbl on Feb. 20.

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.

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