Conditions were mostly stable in the Asian base oils market, with higher-viscosity stocks being more widely offered in the spot market and availability of low-vis grades still described as tight.
The light-vis base oils within the API Group I and II segments have seen healthier demand between last October and February, and supplies have therefore been slim.
The situation was exacerbated by the fact that a number of suppliers had cut back on production of light grades in favor of heavier varieties because of high feedstock costs against low returns.
In China, offers for light-vis grades have climbed, and increases of at least U.S. $10 per metric ton were pushed through. Although buyers were originally resisting the higher indications, they eventually acquiesced because they needed product, trader sources said. While most imports were from Taiwan, many cargoes were also coming from South Korea, sources added.
A majority of cargoes are arriving in China under contract, because spot availability is limited, suppliers said. Taiwanese Group II base oil producer Formosa is not offering light-vis spot cargoes to China in April because most of its output will be shipped to term customers. The producers April volumes moving to China will be similar to those shipped in March, market sources said.
Likewise, Group I producer CPC-Shell is abstaining from offering April spot cargoes because its low-vis production train remains offline and its heavy-vis oils are allotted to contract commitments.
Aside from higher import prices, domestic values of Group I material have also been on the rise in China due to tight supply against healthy demand, coupled with reduced production at local base oil facilities. However, availability should start to improve as buyers turn to the heavier formulations in the spring and summer seasons, sources said.
Furthermore, the restart of base oil plants following extended turnarounds should allow for more product to reach the market in coming months. Sinopecs 150,000 ton per year Group II plant in Jinan, China, was expected to be restarted in early March, but the restart was postponed to April. The plant was taken off-stream in January.
Sinopecs 300,000 t/y Group II unit in Gaoqiao, China, was heard to have been idled in mid-February and was also expected to be brought back up in April, while the companys 100,000 t/y Group II plant in Jingmen, China, remains closed since January and is not likely to restart until April either.Some sources said the plants were actually running at very low production rates, rather than being shut down completely, because of a lack of feedstock vacuum gas oil.
Fushun Petrochemical, a PetroChina subsidiary, was also expected to restart its 260,000 t/y plant in Liaoning in late March after completing a turnaround which started in January. Additionally, a Russian producer intends to increase its supply of Group I base oils to China in April. The supplier was expected to cut back its supply because of an upcoming plant turnaround, but the shutdown has been postponed, according to sources.
In India, buying interest remains lukewarm because most buyers prefer to wait until after the general elections in April or May to finalize business. Nevertheless, suppliers remained optimistic that demand would pick up in May ahead of the monsoon season, which runs from June to September.
U.S. product continues to arrive in India at competitive prices, but the quantities have diminished slightly because domestic demand in the U.S. has started to pick up. Additionally, there are ongoing and upcoming turnarounds at U.S. base oil plants, and producers are building inventories. This has reduced availability for spot and export business, sources explained.
A Northeast Asian supplier has been able to achieve moderate price increases of around $10-$15/ton for cargoes moving to India in April. The hikes were slightly lower than originally intended because of resistance to the higher offers amid adequate supply. Prices for the Group I were hovering near $940-$980/t CFR India for solvent neutral 150, $950-$980/t CFR for SN500 and $1,170-$1,200/t CFR for bright stock.
In the Group II category, 150 neutral was assessed at $1,010-$1,050/t CFR India, and the 500N oil was mentioned at $1,100-$1,140/t CFR, with the low end of the spreads mostly reflecting prices for product originating in the U.S. and the higher end regional material.
Asian base oil prices have been generally stable this week, although ex-tank Singapore indications have undergone some revisions. On an ex-tank Singapore basis, prices were assessed at $1,040-$1,090/t for Group I SN150. The SN500 grade was heard at $1,060-$1,120/t, reflecting a $10/ton upward adjustment at the low end of the range. Bright stock was reported at $1,170-$1,240/t, also showing a $10/t increase at the top end of the spread.
On an FOB Asia basis, Group I SN150 was steady at $950-$980/t FOB Asia. SN500 was holding at $1,030-$1,070/t and bright stock at $1,130-$1,180/t, both FOB Asia. Group II 150N was heard at $1,010-$1,050/t FOB Asia, while 500N was largely unchanged at $1,050-$1,100/t FOB Asia.
In the Group III segment, 4 centiStoke and 6 cSt oils were mentioned at $1,030-$1,080/t FOB Asia, and the 8 cSt grade was heard at $1,020-$1,050/t FOB Asia.
On the shipping front, only a handful of fresh inquiries emerged this week, with a 1,000-ton base oil cargo quoted to cover Onsan, South Korea, to Yokohama, Japan, in late March or early April. A 6,400-ton lot of four grades was expected to be shipped from Ulsan or Yeosu, South Korea, to Mumbai during April 15-20. A 1,500-ton parcel was being discussed for Ulsan to Hong Kong and Zhuhai, China, for April 3-7 lifting.
Upstream, May ICE Brent Singapore futures were trading at $107.69 per barrel in afternoon trading March 31, compared with numbers at $106.68/bbl on March 24.