Asia Base Oil Price Report

Base oil prices in Asia were mostly flat, although there were small adjustments at the local level as some producers tried to keep up with crude oil and feedstock price fluctuations.

Spot prices were generally said to be unchanged from the previous week because there was no clear push from the supply/demand side, or from upstream values.

While some product tightening had been expected during the month of July due to a number of turnarounds taking place in the region, the market appeared to enter the month of August on fairly balanced inventories. In fact, demand in most of Southeast Asia, China and India was said to be lackluster, and availability deemed ample to cover most requirements.

The maintenance shutdown at Taiwanese producer Formosa Petrochemical's base oil plant was heard to be ongoing. The 600,000 metric tons per year API Group II unit in Mailiao was not expected to be restarted until early September.

While the producer has suspended spot shipments and reduced contractual volumes shipped to China in July, it was heard that the supplier was planning to increase the amount of product shipped under contract in August.

In China, China National Offshore Oil Corp. was heard to have shut down its plant in Huizou in mid-July. The 300,000 t/y unit was taken off-line due to technical issues, and was anticipated to be restarted before the end of the month, but there was no confirmation available about whether the plant had resumed production.

Also in China, PetroChina was reported to have planned a turnaround at its plant in Karamay starting in early August. The plant can produce 700,000 t/y of Group I and 600,000 t/y of naphthenic oils. The turnaround was anticipated to last approximately 45 days and would ostensibly affect the paraffinic lines only.

Looking ahead, the Group III segment was expected to experience tighter conditions in September as SK Lubricants was slated to take its plant in Ulsan off-line in September. The plant can produce 701,000 t/y of Group II and almost 1.3 million t/y of Group III base oils.

While all of these shutdowns undoubtedly have affected product availability in Asia, the fact that demand typically slows down in June, July and August due to seasonal patterns, and that more supply was available from Middle East producers, likely contributed to a lack of product shortages.

Upstream, crude oil prices bounced around, moving up on Thursday after reports of a significant drop in United States oil inventories, and then falling again following data that showed that Russia had increased its July crude oil exports to the post-Soviet record levels of October 2016, the month used as a baseline for the production cuts agreed with OPEC.

Additionally, the Trump administration is considering increasing the tariffs on $200 billion of Chinese imports from the proposed 10 percent levy to as much as 25 percent, the Wall Street Journal reported. If this takes place, there is a good chance that China will retaliate by imposing a tariff on U.S. crude oil imports.

On Thursday, Aug. 2, Brent October futures were trading at $73.65 per barrel on the London-based ICE Futures Europe exchange, from $74.49 per barrel for September futures on July 26.

Within this unpredictable landscape, base oil prices remained generally flat, as buyers resisted sellers' overtures towards achieving higher prices, while producers have not given up their hopes of improving margins, which have been squeezed by volatile feedstock values.

At the same time, there was some downward pressure on pricing due to softer crude oil values as compared to a month ago. Adequate regional base oils availability and downward price adjustments emerging in the United States could also play a role.

Spot prices on an ex-tank Singapore basis were unchanged week on week, with Group I SN150 assessed at $780/t-$800/t, and the SN500 at $890/t-$910/t. Bright stock was heard at $960/t-$980/t, all ex-tank Singapore.

Group II 150 neutral was steady at $820/t-$850/t, and the 500N cut at $910/t-$930/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was hovering at $710/t-$730/t, while the SN500 was at $840/t-$860/t. Bright stock was unchanged at $870/t-$890/t FOB Asia.

Group II 150N was holding at $760/t-$780/t, while the 500N/600N was also steady at $830/t-$860/t, all FOB Asia.

In the Group III segment, the 4 centiStoke and 6 cSt grades were heard at $880-$900/t and $860/t-$880/t, respectively. The 8 cSt was gauged at $770/t-$790/t, FOB Asia.

In Taiwan, Formosa Petrochemical adjusted down a couple of its domestic list prices, while leaving one grade unchanged. Formosa left the list price of its Group II 70N intact, but it lowered the price of its 150N by New Taiwan Dollars (NT$) 0.43 per liter for August transactions. The producer also marked down the list price of its 500N by NT$0.63/liter.

At the same time, a local refiner in China was heard to have adjusted domestic prices up, thought to have been driven by recent increases in raw material costs.

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

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