Market conditions were generally healthy in Asia, while some signs of the shift in supply and demand patterns that observers have predicted for the region have started to surface.
Earlier this week, Luberef announced that the upgrade and expansion of its base oil plant in Yanbu, Saudi Arabia, had been completed, and that the company would now be able to produce API Group II base oils (for further details, see Group II Output Begins in Yanbu on LubesnGreases.com. The first export cargo from the facility was said to be on its way to India.
Market participants had been awaiting the start-up of this plant because it is the first large-scale Group II facility in the Middle East, and the added capacity was expected to help ease some of the current tightness seen for the lighter viscosity base oils, both in that region and in Asia.
While Northeast Asia Group II producers will continue to play the main roles in the general supply scene of the region, the availability of cargoes from the Middle East was anticipated to impact prices and alleviate product shortages during turnarounds of major facilities in Asia.
Availability of Northeast Asian Group II spot cargoes has been snug since late last year because of plant outages, reduced production rates, and decreased supply into the region from sources such as the United States, which led buyers to turn to more regional cargoes to cover their product needs.
India has long been a large importer of Middle Eastern Group I base oils, and Luberefs Group II production should attenuate the countrys dependency on Northeast Asian, U.S. and European shipments of these base stocks.
While base oil demand in India was said to be steady, given that activity in the different lubricants segments remained healthy, buying interest in countries which were getting ready to celebrate the Lunar New Year holidays next week has started to slow down.
Product appetite in China has weakened, but importers were expected to come back to the market after the festive interlude – which finishes on Feb. 21 – to seek fresh offers of the different base oil grades as downstream manufacturers will be padding inventories for the spring production cycle.
The light-vis grades were said to be the tightest in Asia at the moment, but this could change as the heavier viscosities start to see more demand in the warmer months ahead.
Meanwhile, market players kept a keen eye on crude oil prices, as futures have shown sharp swings over the last few days.
Brent crude oil futures had reached levels slightly above $70 per barrel two weeks ago, but were on a downward trend this week and slipped further on Thursday on news that U.S. oil production had risen above 10 million barrels per day for the first time since the early 1970s.
Some analysts predicted that the U.S. could become the worlds top oil producer, given that the current leaders Russia and Saudi Arabia are currently adhering to the OPEC-imposed output cuts, and this exerted pressure on oil values.
Brent April futures were hovering at $65.24 per barrel in morning trading on Feb. 8 on the London-based ICE Futures Europe exchange, compared to $69.13 per barrel on Feb. 1.
Despite the slip in crude numbers, the climb in raw material costs seen in recent weeks – crude futures reached four-year highs in late January – together with balanced-to-tight supply/demand conditions have led to increases in base oil spot indications in Asia.
On an ex-tank Singapore basis, Group I SN150 and SN500 were assessed up by $10/t at $730/t-$750/t, and $840/t-$860/t, respectively. Bright stock was also up by $10/t at $920/t-$940/t, all ex-tank Singapore.
Group II 150 neutral was assessed up by $20/t at $750/t-$770/t, and 500N was up by $10/t at $900/t-$920/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed up by $30/t at $670/t-$690/t, and the SN500 grade was also up by $30/t at $780/t-$800/t, FOB Asia, bringing values more in line with published prices widely seen as benchmarks. Bright stock was revised up by $20/t at $830/t-$860/t.
Group II 150N moved up by $40/t to $690/t-$710/t, and the 500N/600N grades were up by $5/t at $790/t-$830/t, all FOB Asia.
In the Group III segment, prices were revised by a nominal amount up by $10/t to reflect discussion levels, with the 4 centiStoke and 6 cSt grades inching up to $800/t-$820/t, and the 8 cSt to $780/t-$800/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.