The base oil market was fairly unchanged this week, thanks to Lunar New Year and the downcast sentiment prevalent in the sector in recent months.
Demand had experienced slight improvement in China ahead of the holiday, as a few buyers were concerned about the possibility that prices would strengthen after the interlude, but most producers were still hopeful that requirements would show a more significant pick-up after the holiday.
Consumers were aware that product availability was plentiful and did not expect shortages in the next few weeks, giving them the opportunity to evaluate offers before agreeing to any purchases.
Some domestic producers – namely PetroChina and Sinopec – have been running plants at slightly reduced rates given the oversupply and lean margins, but there are no major turnarounds scheduled in China during the first half of the year. Most maintenance programs are expected to take place during the second half, according to sources.
There could be some regional product tightening in March given the upcoming turnaround at Formosa Petrochemical’s API Group II plant in Mailiao, Taiwan. The producer, which can manufacture 600,000 metric tons per year of Group II oils, is a major supplier of base stocks into China.
In South Korea, SK Lubricants may be taking part of its 1.97 million API Group II/III plant offline in March as well. There is talk that the turnaround may be delayed, although this could not be confirmed.
At the same time, at least one new plant – Sinopec Nanjing – was expected to come on stream in the second quarter in China, and additional product is anticipated to be introduced imminently by the ExxonMobil expansion in Singapore. Sinopec Nanjing Petrochemical was heard to be slated for start-up in April, bringing 200,000 t/y of Group II oils to the market, while significant volumes of Group II are expected to make their way to China from ExxonMobil’s facility in coming months, according to sources.
But Chinese demand will also largely hinge on requirements from the downstream lubricants segments, and many suppliers are worried that these markets will not be performing as well as in the past, mainly because of a slowing Chinese economy.
The gross domestic product in China is anticipated to hover close to 7 percent this year, compared with 7.4 percent in 2014. China’s GDP averaged 9.08 percent from 1989 until 2014, reaching an all-time record of 14.20 percent in the fourth quarter of 1992, according to data from the National Bureau of Statistics of China.
In India – another nation with impressive economic growth – negotiations between base oil buyers and sellers rendered few concluded deals, as buyers preferred to delay purchases as long as possible. An abundance of offers, both for domestic as well as imported cargoes, provided buyers the advantage of having several options.
Prices have been fairly steady over the last couple of weeks, with numbers for Group I solvent neutral 150 mentioned around $600-660 per metric ton CFR India, while SN500 was heard at $610-670/t CFR.
Bright stock was commanding higher values because it is not easily replaced with other cuts and remained priced higher in most regions, with numbers heard at around $810-830/t CFR India.
Group II values have been under pressure, but indications were mentioned at around $620-650/t CFR India for 150N and at $640-670/t CFR India for 500N.
Given the absence of participants and the subdued trading in most of the region, a majority of Asian base oil prices were assessed as largely unchanged from the previous week.
On an ex-tank Singapore basis, Group I SN150 prices were assessed at $660-$680/t, and SN500 at $640-$680/t. Bright stock was hovering at $1,000-$1,020/t.
On an FOB Asia basis, Group I SN150 was gauged at $540-$580/t FOB, while SN500 was holding at $530-$560/t FOB. Bright stock prices were assessed at $980-$1,000/t FOB.
Within the Group II segment, prices were heard 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 as steady, with the 4 centiStoke and 6 cSt oils at $960-$980/t FOB Asia. The 8 cSt grade was unchanged at $780-$800/t FOB Asia.
On the shipping front, a staggering number of inquiries emerged despite the holiday break, quite a few of them involving cargoes from South Korea. A 1,350-metric ton cargo of two base oil grades was quoted from Yeosu to Jakarta, Indonesia, for Mar. 1-5 lifting. A 3,500-ton lot of four grades was expected to be shipped from Yeosu to Merak, Indonesia, between Mar. 1-10. A 2,000-ton cargo of two grades was also being worked on for Yeosu to Merak for Mar. 1-10 lifting, while a second cargo of 1,500 tons was mentioned for the same route and dates. A 500-ton parcel was being discussed for Yeosu to Taichung, Taiwan, for late Feb. shipment. A 5,000-ton cargo was on the table for Yeosu to Beihai, China, for Mar. 5-10 shipment. A 2,000-ton lot of two grades was expected to be shipped from Yeosu to Tanjung Priok, Indonesia, between Mar. 1-5. A 3,000-ton cargo of two grades was being worked on from Yeosu to Nantong, China, for Mar. 1-10 lifting, while a 2,000-ton cargo from the same origin to Tianjin, China, was likely to be moved on the same dates.
In Japan, a 3,500-ton lot was expected to be shipped from Yokkaichi to Tianjin on Mar. 1-3. A 2,500-ton parcel was on the table for Mizushima to Hong Kong for Mar. 5-9 shipment.
Upstream, April ICE Brent Singapore futures were trading at U.S. $59.65 per barrel in afternoon trading on Feb. 23, compared to $60.94 per barrel on Feb. 16.