A slightly more optimistic outlook greeted Asian base oil participants returning to business after the Lunar New Year holidays, with most prices remaining steady and a few grades showing a small uptick on tightening conditions.
While players agreed that the market had not yet staged a full recovery, and that prices were a long way from regaining some of the territory forfeited since the middle of last year, there were signs that prices may have found a bottom.
A majority of base oil prices in Asia tumbled between 30 percent and 40 percent since last June, pushed down mainly by plummeting crude oil prices and oversupply, but they seemed to be stabilizing.
Some cuts have even experienced a modest upward shift on the back of less volatile crude oil values and steeper offers from regional base stock suppliers, sources commented.
In Taiwan, there were reports that Formosa Petrochemical would be increasing its list prices for domestic shipments in March. The prices of API Group II 70 neutral and 150N, which the producer quotes in New Taiwan dollars, were expected to be lifted by an equivalent of about U.S. dollars $20 per metric ton, while the producer’s 500N would be increased by about $30/t.
The increases were expected to find support in a tightening supply scenario for Group II cuts as Formosa will be taking its base oil plant in Mailiao off line for a month-long turnaround this month. The unit has a capacity of 600,000 metric tons per year and, aside from supplying the domestic market, a large portion of its production is exported to China and other destinations throughout Asia.
While the Taiwanese market was fairly quiet during the week due to the Memorial Day holiday on Feb. 27, the new prices were anticipated to be put into effect on March 1, ahead of the Lantern Festival on March 5.
Previously, Formosa had adjusted prices down several months in a row, given plummeting crude oil values, weak base oil market fundamentals and falling indications throughout the region. The February decrease undertaken by Formosa had called for a decrease equivalent to approximately $55-70/t.
Meanwhile, a major producer in Southeast Asia also initiated a revision of its list prices, but the adjustments were a melange of decreases and increases.
According to market sources, the refiner’s Group II 150N cut will be lowered by $30/t as of March 3, while its 500N will be increased by $20/t on March 13. There was no producer confirmation forthcoming about the price revisions.
The increase of the heavy-vis grade was thought to have been spurred by a tightening of the heavier Group II cuts among heightened buying appetite for these cuts in recent weeks.
There was still downward pressure noted on the lighter grades and most Group I cuts as well, sources noted, although bright stock continued to be a bit of an exception as prices have been weathering the price fluctuations better than their counterparts.
While Group I producers have been able to benefit from lower crude oil and feedstock vacum gasoil (VGO) values, they have also been faced with steep competition from Group II oils whose supply has grown significantly since last year, not only in Asia, but also in the U.S. and Europe.
In the short term, a shutdown at Integrated Refinery Petrochemical Complex’s (IRPC) Group I plant in Thailand in March could ensue in snug conditions for some customers. IRPC will be shutting its 320,000 t/y base oil unit in Rayong to complete some repairs, according to sources.
As a result of the recent price movements observed in Asia and the latest bids and offers discussed in the market, price assessments have been marked up in some cases, left unchanged, or lowered.
On an ex-tank Singapore basis, Group I SN150 prices were unchanged at $660-$680/t, and SN500 at $640-$680/t. Bright stock was steady at $1,000-$1,020/t.
On an FOB Asia basis, Group I SN150 was assessed $10/t down at the high end of the range at $540-$570/t FOB, while SN500 was holding at $530-$560/t FOB. Bright stock prices were assessed at $980-$1,000/t FOB.
Group II prices were heard at $560-$590/t FOB Asia for 150N, showing a $10/t decrease at the high end of the spread, and were slightly higher by $10/t for 500N at $610-$640/t FOB Asia.
Group III prices were assessed as largely unchanged, with the 4 centiStoke and 6 cSt oils mentioned at $960-$980/t FOB Asia. The 8 cSt grade was heard at $780-$800/t FOB Asia.
On the shipping front, a number of fresh inquiries emerged, along with a few lingering ones from the previous week. A 2,000-metric ton cargo was quoted for Yeosu, South Korea, to Sharjah, United Arab Emirates, for March 1-10 shipment. A second cargo of 5,200 tons of two base oil grades was also expected to be shipped from Yeosu to Sharjah in early March.
A 5,000-ton parcel was being discussed for Yeosu to Beihai, China, for March 5-10 shipment.
A 2,000-ton lot of two grades was expected to be shipped from Yeosu to Merak, Indonesia, between March 1-10. A 1,500-ton cargo of two grades was also quoted for Yeosu to Merak for March 1-10 lifting. A 2,000-ton lot of two grades was expected to be shipped from Yeosu to Tanjung Priok, Indonesia, between March 1-5. A 6,000-ton cargo was quoted for South Korea to Gebze, Turkey, for mid-March shipment. A 1,000-ton lot was likely to move from Onsan, South Korea, to Tsurumi, Japan, between March 16-20.
In Japan, a 2,000-ton lot was expected to be shipped from Yokkaichi to Singapore in 1H March. A 2,500-ton parcel was still on the table for Mizushima to Hong Kong for March 5-10 lifting.
Upstream, April ICE Brent Singapore futures were trading at U.S. $61.91 per barrel in afternoon trading on March 2, compared to $59.65 per barrel on Feb. 23.