The decline of Asian base oil prices appears to have stalled – at least momentarily – as crude oil values moved up and base stock prices in other regions also stabilized.
Base oil posted prices in the United States have been largely unchanged over the last two weeks, while values in Europe have either been steady or have edged up marginally.
The return of Asian participants to business, following local holidays in several countries, and a gradual pickup in discussions are also contributing to a more positive sentiment in the market.
Additionally, recent and ongoing base stock plant turnarounds and reduced operating rates in the region have also allowed producers to deal with inventories more efficiently, although the market is still said to be on the long side.
In China, Sinopec’s production was almost halved in September due to limited feedstock at certain locations and planned turnarounds at others.
Most of the base oil to feed Sinopec’s downstream lubricant production was manufactured at the Beijing and Maoming plants during September, but the Beijing plant was heard to have started a one-month turnaround in late September. The unit has capacity to produce 300,000 metric tons per year of API Group I base oils.
It was also heard that China National Offshore Oil Corporation (CNOOC) would start to supply Group II base oils to Sinopec Lubricants in 2016 to supplement Sinopec’s own base stock output.
Sinopec’s Nanyang 50,000 t/y Group I plant was taken offline in mid-August for a two-month turnaround, while Sinopec’s Jingmen facilities were also shut down at the beginning of August.
However, the Jingmen Group I unit was heard to have restarted in early September. The plant can produce 200,000 t/y of Group I base oils. The 100,000 t/y Group II unit at Jingmen was also shut down in early August in order to trim inventories, and it could not be ascertained whether the unit had restarted.
The Chinese market appears to be weighed down by a glut of Group II base oils and prices have dropped to similar levels as those for Group I products.
Sinopec had also been expected to start up a new 200,000 t/y Group II base oils plant in Nanjing earlier this year, but the process has been postponed to some time in October.
Another base oil unit which was also expected to be taken offline in China in September or October was Shandong Qisheng’s 70,000 t/y Group II base oil plant, with the shutdown anticipated to last over a month.
With the seasonal uptick in demand for the lighter base oil grades, suppliers hope that a more balanced situation can be achieved. The light grades have been amply supplied throughout most of the year, while the heavy-viscosity cuts have been tight.
As a means to encourage movement of the light-vis cuts, some producers had bundled sales of the heavy-vis cuts with the lighter oils, but this is not the case any longer as the light grades are enjoying improved demand levels.
Given that negotiations are just now picking up steam, and buyers are still hesitant about securing large cargoes because of concerns about possible price adjustments down the road, October spot prices underwent little change during the week.
On an ex-tank Singapore basis, Group I SN150 prices were assessed at $580/t-$600/t, while SN500 was heard at $700/t-$720/t. Bright stock was hovering at $1,000/t-$1,020/t.
Group II 150N values were largely unchanged at $600/t-$620/t ex-tank Singapore, while the 500N cut was holding at $750/t-$780/t.
On an FOB Asia basis, Group I SN150 was heard at $500/t-$540/t, SN500 at $600/t-$620/t FOB, and bright stock at $930/t-$960/t FOB.
Within the Group II category, prices for 150N were steady at $500/t-$520/t FOB Asia, while 500N was assessed at $690/t-$710/t FOB Asia.
In the Group III segment, transactions were limited, and the assessed prices were not revised due to a lack of confirmed business. The 4 centiStoke and 6 cSt oils were unchanged at $900/t-$930/t FOB Asia, while the 8 cSt grade was gauged at $660/t-$680/t FOB Asia.
The shipping front also experienced a slight revival in that several fresh inquiries popped up this week, and as usual, many involved cargoes ex-South Korea. A 1,000-metric ton base oil parcel was heard for Ulsan to Zhenjiang, China, for prompt shipment. A 1,000-ton lot was quoted for Onsan to Tianjin, China, for Oct. 13-17 lifting and delivery from Oct. 15 onwards.
A 7,000-ton parcel of several base oil grades was on the table for Yeosu to Mumbai, India, for any October dates, needing five days laycan, while another similar cargo of 5,000 tons was also heard for the same route and dates. A 6,750-ton lot also surfaced for Yeosu to Mumbai for Oct. 15-25 shipment, and a 5,600-ton parcel was looking to cover the same route with Oct. 20-25 dates. A 4,000-ton parcel was still being quoted for Yeosu to Sharjah, United Arab Emirates, for Oct. 15-20 lifting, and a 4,400-ton parcel was also mentioned for Yeosu to Mesaieed, Qatar, for the same dates. A 1,500-ton cargo was heard for Yeosu to Koh Si Chang, Thailand, in late Oct. A 1000-ton lot was likely to be shipped from Yeosu to Singapore on Oct. 20-25.
A couple of inquiries involved products ex-Japan, with more details emerging about a 3,000-ton lot from Yokkaichi to Hong Kong and Zhuhai, China, for Oct. 25-29 lifting. A 1,500-ton cargo was also being worked on from Mizushima to Port Klang, Malaysia, for Nov. 6-10 shipment.
Upstream, crude oil futures jumped as Russia continued its military operations in Syria, reigniting concerns over a potentially spreading conflict that could disrupt oil production in the region.
November ICE Brent Singapore futures were trading at $52.96 per barrel in afternoon trading on Oct. 8, compared to $48.65 per barrel on Oct. 5.
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com