Prices were largely stable in the base oils market in Asia, supported by balanced-to-tight supply-demand factors and prospects of increased demand in coming weeks as the spring production cycle got underway.
Market participants were also watching developments on the crude oil side closely, as values have fluctuated over the last couple of weeks, influenced by geopolitical tensions and rising output in the U.S.
On the other hand, crude oil production in China fell 1.9 percent in January and February compared to a year ago, matching a record low registered last August due to mature fields and steep production costs, National Bureau of Statistics data showed.
On Wednesday, March 14, crude futures reversed two days of declines as signs of stronger fuel demand offset an increase in U.S. crude supply. Prices also received some support from Rex Tillersons dismissal as U.S. Secretary of State. The move was thought to have potential implications for U.S. sanctions on Iran, which could impact the latters oil industry and exports, analysts said.
Brent futures were trading at $65.20 per barrel on the London-based ICE Futures Europe exchange on Thursday, March 15, compared to $63.77 per barrel on March 8.
The balanced-to-tight base stock supply fundamentals seen over the last couple of weeks appeared to be particularly evident in the API Group I segment, which was experiencing snug conditions not only in Asia, but also in Europe, the Middle East, and the U.S., with spot indications moving up in some locations.
A majority of producers in the United States were said to be sold out of spot barrels, and reported inquiries for product from almost all parts of the world, but have been largely unable to fulfill these requirements. The tightness was partly attributed to healthy demand not only in the domestic market, but also for exports to South America and Europe. A turnaround at HollyFrontiers Group I plant in Oklahoma seemed to exacerbate the situation.
In the Middle East, it was heard that Iranian Group I producers were not able to offer much in terms of spot availability, limiting buying options for Indian consumers.
There was also a dearth of Russian Group I cargoes moving into China due to a heavy turnaround schedule during the first quarter.
A combination of plant turnarounds and steady demand in Europe has resulted in a strained supply/demand scenario, together with upward pressure on export prices.
Additionally, freezing temperatures have led to an increase in demand and production of heating oil in some regions, leading to a decrease in base oil production at various refineries.
Some buyers are resorting to purchasing Group II base oils where substitution for Group I grades is possible, but Group II cuts were also expected to remain fairly tight in Asia due to ongoing plant turnarounds.
At the same time, new Group II capacity in the Middle East was helping attenuate the supply vacuum in Asia at a time when demand typically peaks as some cargoes were heard to be moving into the region. Group II material from the Luberef plant in Yanbu, Saudi Arabia, for example, was heard to have been booked into India.
The Group III segment was less likely to show significant fluctuations given adequate availability, although a South Korean plant was also heard to be undergoing maintenance this month.
In China, a steady influx of Group III products from Abu Dhabi was expected, and importers had secured several cargoes from regional sources before the Lunar New Year holiday in February as well.
Spot prices in Asia were largely stable week-on-week, with the Group I segment exposed to upward pressure due to a lack of readily available regional cargoes.
On an ex-tank Singapore basis, Group I SN150 was heard at $740/t-$760/t, and the SN500 cut at $850/t-$870/t. Bright stock was holding at $930/t-$950/t, all ex-tank Singapore.
Group II 150 neutral was steady at $760/t-$780/t, and 500N was heard at $910/t-$930/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed at $680/t-$700/t, and the SN500 grade was at $780/t-$800/t. Bright stock was heard at $830/t-$860/t FOB Asia.
Group II 150N was hovering at $700/t-$720/t, and the 500N/600N was gauged at $800/t-$830/t, all FOB Asia.
In the Group III segment, the 4 centiStoke and 6 cSt grades were steady at $810/t-$830/t, while the 8 cSt was holding at $790/t-$810/t, FOB Asia.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.