Trading was somewhat sluggish as lackluster demand for finished lubricants kept buyers from securing large base stock cargoes, while prices remained exposed to upward pressure due to climbing feedstock costs.
Additionally, the National Day or Golden Week holidays observed in China during Oct. 1-7 also contributed to the slow business pace in the region.
Base stock producers expressed concern that crude oil prices continued on an upward trend, but it was difficult to recoup lost margins because of lukewarm conditions in downstream segments.
Some sources were not too optimistic that conditions would improve, as base oil activity traditionally starts to wind down in the last quarter, and comes close to a standstill during the year-end holidays.
Recent and ongoing turnarounds at regional facilities have not tightened the market to the extent these programs had in years past, because the supply gaps might be filled with product from other regions, where availability is also plentiful, sources said.
This seemed to apply to material coming from the Middle East Gulf in particular, as lead times are shorter than those for oils exported from other regions In addition, prices are very competitive, although levels seem to have risen slightly for exports into India on the back of the higher crude oil costs.
The debate whether India would be able to continue sourcing Group I cargoes from Iran after the United States reinstates sanctions on Tehran was becoming less of a question mark. It was heard that Iranian material could possibly continue to be shipped to other destinations in the Middle East, and then re-exported, or handled by European players, as the European Union may not follow the U.S. in re-imposing full sanctions.
Indian consumers were also expected to receive some Group I shipments from U.S. suppliers in October.
Meanwhile, market participants continued to anxiously watch developments on the crude oil front, as geopolitical tensions were impacting price movements.
Crude oil futures slipped on Thursday after registering four-year highs during the previous session, following reports of rising U.S. inventories, and of Russia and Saudi Arabia secretly agreeing back in September to raise crude output.
On Thursday, Oct. 4, Brent November futures were trading at $85.89 per barrel on the London-based ICE Futures Europe exchange, compared to $81.55/bbl on Sep. 27.
Brent on Wednesday had hit a four-year high of $86.74/bbl, lifted by expectations of a tightening market ahead of the expected U.S. sanctions on Iran’s exports as of next month.
Despite the steeper feedstock values seen of late, it was heard that Taiwanese base oil producer Formosa Petrochemical had lowered its domestic list prices for October transactions.
Formosa produces Group II base oils at its 600,000 metric tons per year plant in Mailiao, which has recently been restarted following a two-month turnaround.
The producer was heard to have trimmed the domestic list price of its Group II 70 neutral grade by New Taiwan Dollars (NT$) 0.35 per liter from September levels. The price of the producer’s 150N grade was reduced by NT$ 0.75/liter, while its 500N base oil was marked down NT$ 0.98/liter.
Weak base oil requirements in the days leading up to the national holidays resulted in a decrease in domestic base oil prices in China as well, given that inventories were heard to be more than adequate to meet demand. It remains to be seen whether renewed buying interest after the holidays would manage to stabilize pricing.
While downward adjustments were taking place at the local level in Taiwan and China – despite the upward pressure from rising raw material costs – export base oil spot assessments in Asia were generally steady because early October was considered to be a transitional period, with few transactions taking place. Players hoped that business would pick up later in the month.
Ex-tank Singapore numbers for Group I solvent neutral 150 were unchanged at $760 per metric ton to $780/t, and the SN500/SN600 cuts were at $860/t-$880/t. Bright stock was holding at $925/t-$945/t, all ex-tank Singapore.
Group II ex-tank Singapore assessments were steady, with 150 neutral cited at $805/t-$835/t and 500N at $890/t-$910/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was holding at $700/t-$720/t, while SN500 was mentioned near $820/t-$840/t. Bright stock was also unchanged at $850/t-$870/t FOB Asia.
Group II 150N was hovering at $750/t-$770/t FOB Asia, while 500N and 600N were heard at $810/t-$830/t FOB Asia.
In the Group III segment, 4 and 6 centiStoke grades were assessed at $870-$890/t and $850/t-$870/t, respectively, while 8 cSt was changing hands at $760/t-$780/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.