Asia base oil market participants have adopted a cautious attitude as price trends appear mixed – with some cuts showing marginal increases, some remaining steady, and others experiencing downward pressure.
Recent sharp price cuts were mostly prompted by the combination of plummeting crude oil prices and oversupply, but it appears the supply/demand balance has now taken over as the dominant factor.
Heavy-viscosity grades showed slight tightening over the past couple weeks, likely because of stronger requirements for these grades on expectations of improved activity in the spring, coupled with reduced production due to regional turnarounds.
Light grades, on the other hand, remain exposed to downward pressure as they appear to be more readily available.
Some cuts such as API Group I bright stock have shown a more consistent price trend because of steadier demand and snug conditions, aside from the fact that this cut cannot be easily replaced.
In Taiwan, Formosa Petrochemical has shut down its Group II base oil plant in Mailiao for a month-long turnaround. The unit has a capacity of 600,000 metric tons per year and is likely to be restarted at the end of March.
As a result of reduced availability and slightly higher crude oil prices, Formosa increased its March list prices for domestic shipments by an equivalent to approximately U.S. $20 to $30 per metric ton, depending on grade.
In Southeast Asia, a major refiner also hiked its Group II 500 neutral by $20/t on March 13, according to sources. At the same time, the refiner lowered its Group II 150N cut by $30/t as of March 3. Information about these price changes was not confirmed by the producer.
In Thailand, Integrated Refinery Petrochemical Complexs (IRPC) shut its 320,000 t/y Group I base oil unit in Rayong for repairs this month, causing further regional tightening for Group I cuts.
There was no official word regarding a possible delay of a turnaround at the SK Lubricants 1.97 million Group II/III plant in Ulsan, South Korea. Some sources said part of the plant, namely the trains producing Group II, had been taken off-line for maintenance, but others said the event had been postponed.
The upward movement of Group II prices in Asia was also mirrored in the United States, where Chevron initiated a 20 cent per gallon increase for its Group II oils, effective March 11.
Prices in the U.S. had lost significant ground during multiple consecutive rounds of price cuts since last September, but a tightening of certain grades, together with prospects of increased demand ahead of the spring lubricant production season, were thought to have prompted the upward revisions.
A majority of base oil grades have been in long supply in the U.S. over the past few months, but a few plants have trimmed base oil operating rates because of weaker margins, and increased exports also helped bring inventories more into balance, sources said.
A good number of U.S. base oil sales to India were completed since the beginning of the year, according to sources, and they are expected to arrive over the next couple of months. The additional material will likely exert downward pressure on pricing, but for the time being, domestic suppliers such as Hindustan Petroleum are attempting to move prices up marginally in March.
Additionally, it was heard that prices for Group I solvent neutral 100 of Iranian origin had been hiked by $100/t on limited supply. Demand for Group I cargoes is still healthy in India, despite the availability of competitively-priced Group II oils.
Price assessments in Asia were stable to firm, but little fresh business was reported. A number of cuts were revised slightly upward on higher offers.
On an ex-tank Singapore basis, Group I SN150 prices were steady at $660-$680/t, and SN500 at $640-$680/t. Bright stock was assessed at $1,000-$1,020/t.
On an FOB Asia basis, Group I SN150 was heard at $540-$570/t FOB, while SN500 was slightly up by $10-20/t at $550-$570/t FOB. Bright stock prices were hovering at $980-$1,000/t FOB.
Group II prices were heard at $560-$590/t FOB Asia for 150N, and were moved up by $10/t at the low end of the range for 500N at $620-$640/t FOB Asia.
Group III prices saw little action, with the 4 centiStoke and 6 cSt oils holding at $960-$980/t FOB Asia. The 8 cSt grade was assessed at $780-$800/t FOB Asia.
Shipping activity remained energetic, with several fresh inquiries noted this week, most of them involving parcels moving from South Korea. A 5,200-ton lot of two base oil grades was expected to be shipped from Yeosu or Ulsan to Sharjah, United Arab Emirates, duing March 20-25. A 2,400-ton cargo of four grades was being worked on for Yeosu to Cat Lai, Vietnam, for March 20-26 shipment. A 1,000-ton lot was on the table for Ulsan or Yeosu to Hamriyah, United Arab Emirates, for March 20-30 shipment.
A 2,550-ton lot of four grades was expected to be shipped from Onsan to Jingjiang, China, on March 8-12. A 3,400-ton cargo was also likely to move from Onsan to Zhenjiang, China, during March 8-12.
A 2,500-ton parcel was quoted from Daesan to Yokohama, Japan, for March 13-17 lifting. A 2,000-ton lot was being worked on from Daesan to Dongguan, China, for March 26-30 shipment. Lastly, a 2,500-3,000-ton cargo was under discussion for Mizushima, Japan, to Singapore for March 24-28 lifting.
Upstream, April ICE Brent Singapore futures were trading at U.S. $59.34 per barrel in afternoon trading on March 9, compared to $61.91 per barrel on March 2.