According to sources, the producer lowered its prices for API Group I solvent neutral 150, SN600 and bright stock by U.S. $40 per metric ton. Likewise, its Group II 150N and 500N values were reduced by $40/t as of Jan. 21.

Many market participants view the producers price movements as an indicator of price direction, and wondered whether further revisions were in store.

Base oil prices have fallen in line with plummeting crude oil prices, but while crude has dropped by more than 50 percent over the last seven months, base oil price cuts have been slightly more modest and many thought prices had not reached a bottom yet.

The uncertainty kept buyers on the sidelines as they watched crude oil price movements closely, hoping to get a signal of when it would be advisable to secure base oil cargoes.

Since some consumers have been holding off on purchases, suppliers expected inventories to be exhausted soon, prompting buyers to return to the market in the coming weeks.

Others were slightly more pessimistic, expecting buying interest to remain fairly low until after the Lunar New Year holidays, which will be starting on Feb. 19 and are celebrated in many Asian countries for one to two weeks.

Demand during this period is particularly soft in China, where many downstream manufacturing plants idle operations over the holiday.

One supplier said that requirements typically slow down ahead of the Lunar New Year, but that this year, the situation was particularly alarming as buying appetite had been very weak even before the beginning of the new year.

Some government policy changes were also expected to affect the transportation and crude oil derivative segments in China, as the consumption tax on oil products has been raised, while the price of gasoline and diesel have been lowered, according to the Wall Street Journal.

The Chinese government hiked the consumption tax on a range of oil products for the third time in less than two months, while the official retail prices on gasoline and diesel were reduced with the goal of promoting energy conservation and curtailing pollution.

China increased the consumption tax on gasoline, lubricants and naphtha by 0.12 yuan a liter to 1.52 yuan, while the tax on diesel, jet fuel and fuel oil were hiked by 0.1 yuan a liter to 1.2 yuan.

The National Development and Reform Commission was understood to have cut the retail price of gasoline and diesel by 0.13 yuan and 0.20 yuan a liter, respectively.

Chinese consumption of finished lubricants has decreased in recent months due to an economic slowdown, which has prompted a reduction in automobile purchases and in manufacturing activity, resulting also in lower base oil requirements.

It is difficult to predict when base oil demand will improve, and buyers do not seem concerned about finding enough product because supplies are plentiful, sources added.

The prevailing supply glut is anticipated to continue impacting the market for quite some time. In the short term, requirements could see an improvement after the Lunar New Year and toward the end of the first quarter, when material for the busy spring production season starts to be stocked.

Some producers opt for shutting down their plants for maintenance during the first quarter ahead of the demand uptick. This seems to be the case of Taiwanese producer Formosa, which was understood to have slated a 45-day turnaround at its 600,000 metric tons per year Group II plant in Mailiao in March, and of SK Lubricants in South Korea. SK was expected to shut down its 300,000 t/y Group II plant in Ulsan for a month-long maintenance program in March as well.

Asian prices this week were largely unchanged, although ex-tank Singapore indications underwent another downward adjustment in line with bids and offers in the region.

On an ex-tank Singapore basis, Group I solvent neutral 150 prices were assessed down by $20/t at $740-$770/t, and SN500 also down by $20/t at $730-$770/t. Bright stock was heard at $1,090-$1,110/t, also reflecting a $20/t reduction.

On an FOB Asia basis, Group I SN150 was unchanged at $580-$620/t FOB, while SN500 was heard at $570-$610/t FOB. Bright stock prices were assessed at $1,000-$1,030/t FOB.

Within the Group II segment, prices were holding at $600-$640/t FOB Asia for 150N, and at $620-$650/t FOB Asia for 500N.

Group III prices were largely unchanged, with the 4 centiStoke and 6 cSt oils at $980-$1,000/t FOB Asia and the 8 cSt grade at $880-$900/t FOB Asia.

There were a few inquiries spotted in the shipping segment this week, intended to move product from South Korea and Japan to Southeast Asia. A 1,000-2,000-metric ton cargo was on the table for Yeosu, South Korea, to Merak, Indonesia, for Jan. 15-25 shipment. A similar parcel was also quoted for Feb. 15-25 dates. A 1,500-ton lot of two base oil grades was expected to ship from Yeosu to Jakarta, Indonesia, on Feb. 15-25. A 3,000-ton cargo was likely to be lifted from Mizushima and Yokkaichi, Japan, to Manila, Philippines, in mid-February.

Additionally, a 3,500-ton parcel of two grades was being discussed for Yeosu to Nantong, China, for Jan. 16-29 lifting. A combined cargo of two 600-ton lots was likely to move from Ulsan, South Korea, to Bayuquan, China, at the end of Jan. or early Feb. Lastly, an 800-ton cargo was on the table for Ulsan to Kaohsiung, Taiwan, for Jan. 25-30 shipment.

Upstream, March ICE Brent Singapore futures were trading at U.S. $48.02 per barrel in afternoon trading on Jan. 26, compared to $49.43 per barrel for February futures on Jan. 19.