Asia Base Oil Price Report

Climbing crude oil prices and the return to business of participants following various local holidays offered support to base oil prices, with values said to be unchanged from the previous week's levels.

While the ample supply of a few cuts remained a matter of concern for some producers who preferred to avoid carrying high inventories, other grades, such as the heavy-vis cuts, have achieved a more balanced position, propping up price indications.

However, market players said that prices were still in a precarious position due to lukewarm demand and more than adequate availability of most base stocks, not only in Asia, but in other regions as well. Any large swings in feedstock prices could push base oil values in either direction, sources said.

There was also a bit of a psychological element at play as consumers expected more material to become available in an already oversupplied market with the start-up of a number of new base oil plants in China, and the inception of additional Group II product from the expanded ExxonMobil plant in Singapore in the next few months (for further details, see ExxonMobil Completes Singapore Upgrade in this issue of Lube Report Asia).

At the same time, the influx of product from other regions, such as the Middle East, continues to grow, while shipments from some sources such as Russia appear to be contracting.

United Arab Emirates' producer Adnoc was heard to have shipped approximately 8,000 metric tons of API Group III oils for mid-to-late June arrival in China.

On the other hand, it was heard that a Russian supplier has substantially cut the volumes of Group I oils shipped to China this month. This was partly attributed to the fact that China is steering away from Group I usage and is increasingly using high-performance base oils from the Group II and III categories, mainly for automotive applications, due to stricter emissions regulations.

Upstream, crude oil futures had been trading at their lowest level in five months, when they surged by more than 4 percent on Thursday after two tankers were attacked in the Gulf of Oman, a key shipping lane for transportation of oil products from the Middle East.

The Japanese owner of the Kokuka Courageous reported that the tanker had been attacked off Fujairah, a port in the United Arab Emirates. A second tanker, the Front Altair, was also attacked while sailing between the U.A.E. and Iran, according to the Norwegian Maritime Agency. Both suspected attacks occurred near the strategic Strait of Hormuz.

The attacks come on the back of other similar incidents amid rising tensions in the region between the United States, its Arab allies, and Iran.

Aside from the attacks, oil prices were supported by an OPEC report stating that the organization expects global crude demand to improve in the second half of the year, with stronger draw from the Americas anticipated to offset weaker consumption in Europe and Asia.

On Thursday, June 13, Brent August futures were trading at $61.07 per barrel on the London-based ICE Futures Europe exchange, up from $60.60/bbl on June 6.

In Taiwan, domestic base oil prices were stable to slightly higher as the local producer, Formosa Petrochemical Corp., was heard to have increased the list price for June shipments of its Group II 500 neutral grade, while keeping its 70N and 150N grades unchanged from May. Formosa's 500N cut was marked up by New Taiwan dollar 0.13 per liter (1 NT$ is equivalent to approximately U.S. $0.031).

In India, base oil prices were reported as stable, with demand anticipated to soften as the monsoon season has started, and the heavy rains tend to affect logistics and transportation in various regions of the country, dampening demand for raw materials.

Spot prices in Asia were generally maintained from the previous week as the market sought direction, and a majority of business was being conducted under contract.

Ex-tank Singapore Group I prices for the solvent neutral 150 grade were unchanged at $740-$760/t per metric ton, while the SN500 was holding at $790/t-$810/t. Bright stock was heard at $900/t-$920/t, all ex-tank Singapore.

Group II 150 neutral was assessed at $780/t-$800/t, while the 500N was steady at $790/t-$820/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed at $630/t-$650/t, and the SN500 grade was heard at $620/t-$640/t. Bright stock was mentioned at $790/t-$810/t, FOB Asia.

Group II 150N was holding at $620/t-$640/t FOB Asia, while the 500N and 600N cuts were at $640/t-$660/t, FOB Asia.

In the Group III segment, the 4 centiStoke grade was assessed at $820-$860/t and the 6 cSt was at $830/t-$875/t. The 8 cSt grade was steady at $730/t-$760/t, FOB Asia for fully-approved product.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.