Asia Base Oil Price Report

Asias base oil prices moved lower as demand lagged, supply remained plentiful and crude oil values lost ground.

Lower spot offers from several base oil producers were not enough to attract buyers, with discussions yielding few concluded deals due to the fact that consumers were striving to keep low inventories through the end of the year.

Activity in downstream segments is expected to slow down during the holidays, as some plants shut down operations temporarily and others run at reduced rates, and base stock buyers were therefore securing minimal amounts of raw materials.

Lubricant demand from the industrial segment has declined, and requirements from the automotive sector have equally been lackluster in the last few weeks, suppliers said.

The automotive segment in India in particular has been hit by unexpected plant shutdowns in the Chennai area, caused by heavy rains and flooding. Rainfall reaching record levels has led to massive evacuations and a death toll of over 260 in the area, according to local media reports.

Market analysts predicted that the heavy rains would impact domestic and export sales of Chennai-based companies. Several car and motorcycle manufacturers, including Ford, Hyundai, BMW, Daimler, Renault-Nissan, TVS Motor, Sundaram Clayton, and Ashok Leyland have plants in the Chennai area and have halted operations until the situation improves and employees can safely return to their workplaces.

In other key markets such as China, base oil demand from the lubricants sector has weakened as well, and the heavy-viscosity grades have been particularly affected by a lack of buying interest because these cuts see less demand during the winter season, leading to downward price adjustments. Prices have seen reductions between $20 per metric ton and $40/t over the last couple of weeks.

Similarly, in Taiwan, timid buying appetite, ample regional supply of base oils, and sliding feedstock prices have led local producer Formosa Petrochemical to adjust domestic list prices for December cargoes.

It was heard that Formosa had marked down domestic list prices for its API Group II 70 neutral and 150N grades by Taiwan New Dollars (TWD) 0.58 per liter, while its Group II 500N was reduced TWD 1.88/liter.

Formosa had also lowered its December Group II spot export prices into China in late November, with the 500N cut seeing decreases of around U.S. dollars $30/t-$40/t to $600-$620/t FOB Taiwan.

In Southeast Asia, a major refiner was also understood to have reduced its December list prices in a move that was thought likely to have an impact on price ideas in the region moving forward.

According to sources, the refiner lowered its Group I solvent neutral 150 by U.S. Dollars USD $40/t , and its SN600 grade $30/t.

The producer's Group II 150N list price was trimmed $20/t, while its 500N was cut by $40/t. All the adjustments went into effect on Dec. 2. There was no producer confirmation forthcoming about the price revisions.

In other regions, base oil prices have also seen fluctuations this week, with a number of U.S. producers adjusting prices down by 10-20 cents per gallon based on the need to clear inventories before the end of the year and a drive to maintain market share.

A majority of Asian base oil assessments were revised down this week to reflect current market conditions, while a few remained unchanged.

On an ex-tank Singapore basis, Group I SN150 prices were lower by $30/t at $510/t-$530/t, while SN500 was down $20/t at $590/t-$610/t. Bright stock also was assessed down $20/t at $930/t-$950/t.

Group II 150N values were revised down by $10/t at $530/t-$550/t ex-tank Singapore, while the 500N was assessed down $30/t at $630/t-$650/t.

On an FOB Asia basis, Group I SN150 was lower by $10/t at $460/t-$490/t, SN500 was down by $20/t at $550/t-$570/t FOB, and bright stock reflected a $10/t drop at $880/t-$910/t FOB.

In the Group II category, prices for 150N were assessed down $10/t at $460/t-$480/t FOB Asia, while 500N was also lower by $20/t at $580/t-$610/t FOB Asia.

The 4 centiStoke and 6 cSt oils in the Group III segment were unchanged at $870/t-$900/t FOB Asia, while the 8 cSt grade was lower by $10/t at $630/t-$650/t FOB Asia.

Oscillating crude oil values continue to exert pressure on base oil prices, with futures mostly moving at lower levels than the previous week, but rising slightly on Dec. 3 from near-2015 lows after speculation that Saudi Arabia would propose a reduction of crude oil at OPEC's meeting on Dec. 4.

January ICE Brent Singapore futures were trading at $42.91 per barrel in afternoon sessions on Dec. 7, compared to $44.65 per bbl on Nov. 30.

On the shipping front, activity was fairly low-key, with a number of inquiries seen to ship base oils from South Korea as well as Japan. A 500- ton was on the table for Onsan, South Korea, to Bangkok, Thailand, for first half of December shipment. A 1,400-ton lot was being discussed for Onsan, South Korea, to Tsurumi, Japan, for Dec. 11-13 lifting and delivery around Dec. 15. A 500-ton parcel of 220N was likely to ship from Yeosu or Ulsan to Nantong, China, for shipment during the first half of the month.

In Japan, a 1,500-2,000-ton lot of high-vis base oil was expected to be shipped from Yokkaichi to Zhapu or Tianjin, China, around Dec. 9-14, requiring a ship inspection report (SIRE). A second parcel of 4,500-4,700 tons was mentioned for Mizushima to Singapore and Port Klang, Malaysia, for Dec. 21-25 lifting, also requiring SIRE.

Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com