Prices in the Asian base oil market continue to be weighed down by ample supply and lackluster demand, with slow activity further dampened by the mid-autumn holidays in China and Taiwan this week, and the early October national days in China and Korea.
Before the start of the holiday period, participants said that numerous spot offers into China had elicited little buying interest, and many cargoes had remained unsold. However, it appears that availability in China will be slightly reduced moving forward as spot shipments of imported product are being trimmed in September, and local production facilities embark on routine turnarounds.
A Taiwanese API Group II producer that reduced production rates since July was heard to be exporting fewer spot and contract cargoes to China in September, due to flagging demand, sources said.
Maintenance turnarounds loom for a couple Chinese base oil plants. Sinopec Gaoqiao is expected to close its 400,000 ton per year Group I unit and its 300,000 t/y Group II unit in Shanghai this month. The companys sales into the domestic market, after its own downstream requirements have been met, were expected to fall from August to September because of the shutdown at Gaoqiao.
China National Offshore Oil Corp (CNOOC) has scheduled at two-month closure of its 400,000 t/y Group II base oils unit in Huizhou, starting in early October, according to sources.
Additionally, a Russian supplier that routinely ships Group I cargoes to China will be completing a maintenance program at its own plant this month, and is therefore expected to export less than usual to China – less than half its normal volumes in September, sources commented.
In India, meanwhile, base oil demand has been affected by a drawn-out monsoon season, with logistics and transportation hampered by the heavy rains. Prices in India have seen some softening, in particular within the Group II category, given an increase in offers from Northeast Asian suppliers and cargoes from the United States. A number of U.S. suppliers were described as open to competitive buying ideas because they are trying to gain or maintain market share after the start-up of Chevrons large plant in Pascagoula, Mississippi, U.S. There are also plentiful offers from South Korean producers, sources said.
The increase in offers of deep-sea material has coincided with a small drop in cargoes from the Middle East to India. The latter appeared due to a tightening of supplies in some countries of the region, coupled with higher prices due to military and political conflicts and production issues. Base oil cargoes that were typically offered from the Middle East to India are yielding better netbacks if sold into countries such as Iraq, where prices have risen, sources said.
The gradual softening of Group II prices in Asia over the last several months has also led to downward pressure on Group I offers, as the almost non-existent price gap between the two groups has resulted in increased substitution of Group II cuts for Group I grades.
Base oil prices in Asia were said to be largely unchanged this week due to a lack of trading, but remain under downward pressure because of weak market fundamentals. Suppliers remained hopeful that buying interest would pick up in October – following the September and October regional holidays and ahead of the year-end holiday period – and that the uptick in demand would support more stable pricing.
On an ex-tank Singapore basis, Group I solvent neutral 150 was heard at $1,080-$1,120/t. The SN500 cut was unchanged at $1,070-$1,120/t, and bright stock at $1,220-$1,270/t.
On an FOB Asia basis, Group I SN150 was mentioned at $990-$1010/t FOB. SN500 was assessed at $1,000-$1,020/t FOB. Bright stock prices were steady at $1,170-$1,190/t FOB.
Within the Group II segment, prices for 150 neutrals were mentioned at $1,010-$1,030/t FOB Asia, while 500N was heard at $1,010-$1,040/t FOB Asia.
The Group III segment remained quiet, with prices of 4 centiStoke and 6 cSt oils assessed at $1,040-$1,080/t FOB Asia. The 8 cSt grade was heard at $1,020-$1,040/t FOB Asia.
Discussions on the shipping front lacked effervescence, with only a handful of fresh inquiries popping up this week. A 1,000-metric ton bright stock cargo was heard for Karachi, Pakistan, to Sharjah, United Arab Emirates, for prompt shipment. In South Korea, a 5,000-ton parcel made up of two base oil grades to cover Daesan to Mumbai, India, or alternatively an 8,000-ton lot to Mumbai and Sharjah were being quoted for second half Sept. lifting. A 1,000-ton lot was expected to be shipped from Yeosu to Taichung, Taiwan, on Sept. 20-25. Lastly, a 2,500-ton parcel was on the table from Yeosu to Ho Chi Minh, Vietnam, also for Sept. 20-25 shipment.
Upstream, October ICE Brent Singapore futures were trading at $99.85 per barrel in afternoon trading on Sept. 9, compared to $102.87/bbl on Sept. 1.