The short-lived upswing experienced by crude oil futures about a week ago had nurtured producers hopes that Asian base oil prices would stabilize, but values succumbed to downward pressure as fundamentals remained weak.
A major Southeast Asian refiner was heard to have lowered prices for some of its base oil grades once again, likely to foster buying interest and maintain market share as demand remains sluggish and supply plentiful. The producer is also expected to bring additional API Group II capacity on line in late February or early March.
Sources said that the producer decreased list prices for its Group I solvent neutral 150 by U.S. $30 per metric ton, while its SN600 was marked down $20/t as of Feb. 11.
Prices for the suppliers Group I bright stock, and its Group II 150 neutral and 500N cuts were not revised in what represents the producers 12th price adjustment since last Sept. There was no producer confirmation forthcoming about this round of price decreases.
The price reductions from the major refiner were seen as a harbinger of the pricing situation in Asia. Other suppliers were concerned that base oil prices may not have found a bottom yet, and would continue to deteriorate.
A few participants expected fundamentals to improve only after the Lunar New Year holidays, which start on Feb. 19 in several countries in Asia and typically bring about a slowdown in activity.
A few consumers had started to replenish stocks ahead of the holiday, on concerns that base oil prices would strengthen after the festivities when most buyers were expected to return to the market.
However, suppliers said that purchases had been limited to small volumes given that buyers did not want to risk securing large volumes when there was still a chance that prices would fall again after the holiday, particularly if crude oil prices continued to weaken.
Chinese buyers were especially wary due to uncertainties related to the Chinese economy, as there were signs that growth had decelerated.
New numbers reflecting Indias gross domestic product growth were revealed by Indias statistics ministry this week, showing that India has outpaced China as the fastest-growing major economy in the world, the Wall Street Journal reported. However, while the Chinese growth rates may be slowing, its economy is still four times the size of Indias, analysts pointed out.
The ready availability of domestic Group I cuts was discouraging the acquisition of Group I and II imports in China, although bright stock and the heavy grades were performing better than their light counterparts, sources said.
Indian buyers were also less interested in importing base oils as domestic supply of Group I and II cuts was plentiful and local producers had lowered prices in recent weeks to remain competitive.
Additionally, most buyers preferred to secure small cargoes from domestic suppliers to avoid the risk involved in purchasing imports with a long lead time, as prices were still very volatile.
Most base oil cuts were expected to be in good supply in coming weeks, despite upcoming turnarounds at a couple of regional facilities.
Taiwanese producer Formosa was still expected to shut down its 600,000 metric tons per year Group II plant in Mailiao for a 45-day turnaround in March, but there were reports that the turnaround at the SK Lubricants plant in Ulsan, South Korea, would be delayed from its original date in March.
Sources said that SK was still evaluating the most suitable date to perform maintenance at the plant, which can produce 1.97 million metric tons per year of Group II and III oils.
It was also heard that Sinopec would be postponing the restart of its 150,000 t/y Group II base oils unit in Jinan and its 100,000 t/y Group II unit in Jingmen from February to March.
Given that the market is currently amply supplied, the shutdowns were anticipated to have limited impact on base stock availability, although some buyers opted for securing cargoes in case of tightening conditions.
While trading was generally subdued, price assessments were revised this week in line with the downward price trend observed and the published prices widely regarded as benchmarks for the region.
On an ex-tank Singapore basis, Group I solvent neutral 150 prices were assessed down by $50-60/t at $660-$680/t, and SN500 at $640-$680/t. Bright stock was also revised down by $60/t at $1,000-$1,020/t.
On an FOB Asia basis, Group I SN150 was down $20/t at $540-$580/t FOB, while SN500 was adjusted down $20-30/t at $530-$560/t FOB. Bright stock prices were assessed down by $10/t at the low end of the prevailing range at $980-$1,000/t FOB.
Within the Group II segment, prices were also lower by $20/t at $560-$600/t FOB Asia for 150N, and were largely unchanged at $600-$630/t FOB Asia for 500N.
Group III prices were assessed slightly lower, with the 4 centiStoke and 6 cSt oils at $960-$980/t FOB Asia, reflecting a $20/t drop. The 8 cSt grade experienced a larger revision to bring it more in line with current price ideas at $780-$800/t FOB Asia, although there were few deals reported and therefore, this grade was difficult to assess.
On the shipping front, there was a flurry of inquiries to move product mostly ex-South Korea this week. A 5,000-metric ton lot of two base oil grades was being discussed for Yeosu to Beihai, China, for Feb. 24-27 shipment. A 500-ton cargo was on the table for Yeosu to Taichung, Taiwan, for Feb. 17-22 lifting and Feb. 23-26 delivery. A 1,000-ton lot of two grades was still in discussion for Yeosu to Ho Chi Minh, Vietnam, for Feb. 20-28 lifting. A 6,000-ton parcel was expected to be shipped from Onsan to Kaohsiung and Taichung, Taiwan, plus Shui Dong and Dongguan, China, on Feb. 20-25. A 5,000-ton cargo was being quoted from Onsan and Ulsan to Xiaohudao and Dongguan, China, for Feb. 10-15 lifting. A 7,000-ton lot was being worked on for Daesan and Ulsan to Singapore and Merak, Indonesia, for March 10-20 shipment. A 1,000-ton parcel was expected to be shipped from Onsan to Yokkaichi, Japan, on Feb. 20-28.
Elsewhere, a 3,000-ton lot of two grades was likely to be shipped from Cilacap, Indonesia, to Nantong or Taicang, China, in the second half of February. A 2,000-ton cargo was on the table for Thailand to Chittagong, Bangladesh, for shipment in Feb. or first half March. A 1,000-ton lot was being worked on for Yokkaichi to Taichung for Feb. 20-28 lifting.
Upstream, March ICE Brent Singapore futures were trading at U.S. $60.94 per barrel in afternoon trading on Feb. 17, compared to $57.68 per barrel on Feb. 9.