Buyers have become quite hesitant about purchasing large quantities of base oils because it is difficult to predict how strong demand for finished lubricants will be in the third and fourth quarters, given economic turmoil in various regions.

In the key market China, the plunge of the Shanghai Composite Index, accompanied by the dramatic fall of shares of Chinese publicly-listed petrochemical companies, reignited concerns that sharp fluctuations in the stock market would further undermine the countrys economic growth.

Last Wednesday, Chinese petrochemical major Sinopec halted trading of its shares in the Hong Kong bourse, after having dropped for three consecutive trading days, while shares of Chinese oil and gas giant PetroChina slumped 9.1 percent in Shanghai and were down 4.3 percent in Hong Kong. China National Offshore Oil Corporation also shed 8.4 percent in Hong Kong on July 7, according to media reports.

These developments are likely to impact growth prospects for the Chinese base oil and lubes markets, sources said, which already had been expected to be fairly moderate this year.

Industry analysts agreed that market growth in Asia is still expected to be promising, but there is no doubt that there has been a slight decline in China.

While Asia Pacific continues to be the growth market of the world, the pace of growth has slowed, especially in China, ExxonMobil Global Base-Stocks and Specialties Planning Manager X.B. Cox told participants at the ICIS conference in Singapore in June, underscoring that there is going to be a significant shift towards higher performing lubricants, especially API Group II grades.

ExxonMobil introduced additional Group II capacity from its expanded base oil plant in Jurong, Singapore, earlier this year. While the producer has not revealed the additional quantities coming to the market, market analysts estimate that the expansion increased Group II base oils capacity at the plant by 400,000 metric tons per year.

Demand for Group II continues to be strong, with the heavy-viscosity cuts said to be still tight in Asia, offering support to firm prices.

In Taiwan, Group II producer Formosa Petrochemical was heard to have communicated modest increases for its July domestic prices of 70N and 150N equivalent to about U.S. $3-$4 per metric ton, and a higher increase of about $20/ton for its 500N cut.

The Taiwanese producer continues to export significant quantities of Group II oils for contract customers in China, with July volumes expected to be similar to those moving in June, which was seen as a positive sign in terms of demand stability, according to sources.

Meanwhile, in Japan, suppliers reported a cautious stance on the part of consumers, both on the domestic and regional fronts.

A source commented that lubricant sales in Japan have started to dwindle, and that customers in Asia expected requirements in the near future to be weak.

Japanese consumers in general appeared to be well-supplied, despite recent turnarounds at several local base oil facilities.

JX Nippon has undertaken an extended turnaround of about five months at one of its Mizushima units since April. The plant can produce 250,000 t/y per year of Group I base oil.

Also in Japan, Cosmo Oil shut down its 200,000 t/y Group I base oil unit at Yokkaichi for a one-month turnaround from early June. It could not be ascertained whether the plant had been restarted.

Idemitsu Kosan was heard to have completed a routine two-month turnaround at its Chiba facilities at the end of June. The units can produce 123,000 t/y of Group I, 138,000 t/y of Group II and 44,000 t/y of Group III oils and they have all been restarted, allowing the producer to schedule some exports. The producer had prepared inventories for the turnaround and did not report any shortages of base oil supply to the domestic market during the shutdown period.

In terms of base oil prices in Asia, few fluctuations were noted during the week in a thinly traded market, although some Group II cuts did move up slightly on higher offers.

On an ex-tank Singapore basis, Group I SN150 prices were steady at $660/t-$680/t, SN500 was heard at $780/t-$800/t, and bright stock was holding at $1,110/t-$1,130/t.

On an FOB Asia basis, Group I SN150 was assessed at $560/t-$590/t, SN500 at $680/t-$700/t FOB, and bright stock at $1,080/t-$1,100/t FOB.

Within the Group II category, prices for 150N were slightly up by $5-$10/ton at $585/t-$620/t FOB Asia, and prices for 500N were assessed up by $5-$10/ton at $725/t-$750/t FOB Asia.

Within the Group III segment, prices were largely assessed unchanged. The 4 centiStoke and 6 cSt oils were holding at $920/t-$940/t FOB Asia, while the 8 cSt grade was heard at around $700/t-$720/t FOB Asia.

On the shipping front, there were fewer inquiries noted than last week, but a number of cargoes were expected to be shipped from South Korea, Japan and Malaysia. A 1,500-metric ton parcel made up of two base oil grades was quoted from Yeosu to Haiphong, Vietnam, for second-half July shipment.

A 5,200-ton cargo of six grades was expected to be shipped from Yeosu to Mumbai in second half July. A 1,500-ton lot of two grades was being worked on for Yeosu to Merak, Indonesia, for July 23-27 lifting. A 700-ton parcel was on the table for Onsan to Taicang, China, for July 15-20 shipment and delivery between July 18 and July 23. A 1,400-ton shipment was being discussed for Onsan to Tsurumi, Japan, for July 23-25 lifting and delivery July 25-27.

In Japan, a 2,000-ton cargo was expected to be shipped from Negishi to Manila, Philippines, at the end of July/early August, and in Malaysia, a 2,000-ton cargo was likely to move from Malacca to Sharjah, United Arab Emirates, in the second half of July.

Upstream, August ICE Brent Singapore futures were trading at $57.65 per barrel in afternoon trading on July 13, compared to $59.32 per barrel on July 6.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.