Prices for a number of base oils inched up this week, driven by higher offers on the back of firm crude oil and feedstock values and thinning margins, while other grades remained flat on subdued demand.
Following drone attacks on key Saudi Arabian oil production facilities, crude oil futures jumped last week, and while numbers have retreated, they still hovered at lofty levels, pressuring margins and prompting base oil producers to adjust indications. Fluctuations of local currencies against the United States dollar also impacted regional pricing.
There were reports that a major producer based in Singapore would be increasing contract prices to China at the beginning of October. Adjustments from this producer are often seen as a bellwether of price trends for the region.
The producer's contract prices for its API Group I 150 solvent neutral, 500/600SN and bright stock were heard to be moving up by U.S. $40 per metric ton on Oct. 4. The company's Group II 150N and 500N were reported to be increasing by $40/t as well.
Domestic prices in China have also been creeping up, and have prompted end-users to limit purchases to small volumes needed to run day-to-day operations so as to avoid the risk of paying high prices today, only to see values soften tomorrow.
Likewise, regional suppliers were heard to have lifted spot offers for some base oil grades, while keeping other nominations steady, despite some downward pressure on prices on account of oversupply conditions.
Buyers looking to fulfill immediate product needs acquiesced to the steeper prices, but secured mostly smaller, prompt shipments.
Product availability was deemed adequate-to-long as most facilities were running well and demand has slowed down compared to the first half of the year.
However, activity has started to pick up in some corners of the market such as India as the monsoon season is over and there were fewer logistical issues afflicting the supply system.
Product availability in a number of segments was also somewhat tighter on account of ongoing plant turnarounds.
In Malaysia, Petronas was heard to have shut down its Melaka base oil facilities for a routine turnaround that may last two and a half months. The producer was expected to increase production of Group III+ base oils this year and the turnaround was thought to be linked to a facilities upgrade, although this could not be confirmed. The Petronas plant can produce 318,000 metric tons per year of Group II/III and III+ base oils, according to Lubes'n'Greases Guide to Global Base Oil Refining.
In Japan, a turnaround at JXTG Nippon Oil & Energy's Mizushima A base oil plant started earlier this month and was expected to be completed in mid-November. The unit has capacity to produce 228,000 t/y of Group I/III base oils.
There were unconfirmed reports thata refinery in the Middle East had trimmed operations, but it appears that this was due to feedstock supply issues rather than a planned turnaround as reported last week.
The output curtailment was thought to be connected to the attacks on Saudi crude infrastructure, as the facilities supply oil to the country's main petrochemical sites. The supply disruption was heard to have affected refineries at Jubail and Yanbu, but it could not be ascertained whether production of base oils and other products had been impacted.
Additionally, some shipment delays were noted throughout Asia due to a string of storms and typhoons that caused port closures and logistical issues. Typhoon Tapah was the latest of the powerful storms that battered southern South Korea and Japan earlier this week, causing injuries, power outages and flight cancellations.
Spot prices in Asia were assessed stable to firm this week on higher bids and offers. The price ranges portrayed below may be adjusted at a later date to reflect some of the announced increase initiatives which go into effect next week.
Ex-tank Singapore Group I prices for the SN150 grade were unchanged at $720/t-$740/t, while the SN500 was heard at $770/t-$790/t. Bright stock was holding at $840/t-$860/t, all ex-tank Singapore.
The Group II 150 neutral was steady at $750/t-$770/t, while the 500N was at $760/t-$780/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed at $600/t-$620/t, and the SN500 grade was steady at $560/t-$580/t. Bright stock was heard at $740/t-$760/t, FOB Asia.
Group II 150N was slightly firmer by $10/t at $570/t-$590/t FOB Asia, while the 500N and 600N cuts were also up by $10/t at $580/t-$600/t, FOB Asia.
In the Group III segment, the 4 centiStoke was holding at $790-$820/t and the 6 cSt at $810/t-$855/t. The 8 cSt grade was unchanged at $710/t-$740/t, FOB Asia for fully-approved product.
Upstream, crude oil futures fluctuated throughout the week, with numbers falling mid-week as Saudi Arabiaannounced that it would be able to complete repairs to the damaged Abqaiq facility earlier than previously expected. The easing of concerns surrounding the worlds largest oil supply outage led to a shift in focus towards economic uncertainties and geopolitical tensions in various parts of the world.
Oil prices also slipped on Wednesday after U.S. crude inventories were reported to have risen, and worries grew about a demand slowdown following U.S. President Donald Trumps comments about failing trade talks with China.
On Sept. 26, crude futures were down sharply from the highs observed the previous week, with Brent November futures trading at $62.19 per barrel on the London-based ICE Futures Europe exchange, compared to $65.01/bbl on Sept. 19, and $60.45/bbl on Sept. 12.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.