Given fresh crude oil price fluctuations and ongoing concerns over China's economic prospects, it was not surprising to observe further downward price movements on a number of base oil grades in Asia.
The turmoil in China's stock market the previous week, together with additional data showing a contraction in the country's manufacturing sector, are placing a damper on business, not only within China, but in other countries in Asia as well.
Instabilities of the Chinese currency and a weakening of local currencies against the U.S. dollar have also turned imports more expensive in countries such as Japan, India and Indonesia, affecting the volume of base oils currently changing hands, sources explained.
Imports into China have also dropped, as requirements from downstream applications have been lackluster, and participants are not too optimistic that there will be the traditional uptick in demand ahead of the Lunar New Year holiday.
While buyers across Asia typically start to build inventories ahead of the festive period in early February, this year may be different in that consumers might prefer to keep lean stocks to avoid holding expensive material that may drop in value in a short time.
The lower regional requirements are exacerbating the current oversupply situation in Asia. A few producers have resorted to exporting base stock to Europe and the U.S. to help manage inventories, as there have been some arbitrage opportunities.
However, this week, U.S. producer Motiva has announced a fresh round of price decreases, which should make the U.S. market less attractive to Asian suppliers, sources speculated.
Motiva lowered the price of its API Group II base oils by 10 cents per gallon for its 110 viscosity cut and 15 cents/gal. for both its 220 vis. and 600 vis. grades. Other U.S. producers were evaluating market conditions to decide whether to follow Motiva's initiative.
A number of producers were also selling certain grades like the heavy-vis cuts bundled with lighter cuts that appeared more abundant, in an effort to lower product overhang.
Yet other Asian producers have trimmed production rates, or shut down operations for maintenance work to help balance supply and demand conditions, sources said.
A number of Sinopec subsidiaries in China were expected to lower operating rates ahead of the Lunar New Year holiday, while Sinopec Jingmen shut down its 200,000-metric tons per year Group I unit in Jingmen in late December. The plant was heard to still be offline, according to sources.
With crude oil prices showing so much volatility in recent weeks, it was only natural that base oil market participants kept an anxious eye on the latest developments.
Brent oil snapped an 8-day downward trend as some players covered short positions after crude prices plummeted to 12-year lows, on concerns that additional crude coming from Iran would exacerbate the current global oversupply.
February ICE Brent Singapore futures were trading at $30.13 per barrel in afternoon sessions on Jan. 14, compared to $32.60 per bbl. on Jan. 11.
Price assessments in Asia were mixed this week, given that some ranges lost ground, others remained unchanged, and Group I bright stock and Group II 500 neutral were adjusted up on an ex-tank Singapore basis, to better reflect current market values.
Within the Group I category, solvent neutral 150 was holding at $540/t-$570/t ex-tank Singapore, while SN500 was slightly lower by $10/t at $610/t-$630/t. Bright stock was assessed up by $30/t as discussions were taking place at around $1,000/t-$1,020/t.
Group II 150N values were fairly steady at $510/t-$530/t ex-tank Singapore, while the 500N was revised up by $20/t to reflect current ideas at $660/t-$680/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed lower by $20/t at $440/t-$470/t, while SN500 tumbled by $40/t to $460/t-$480/t FOB. Bright stock prices were unchanged at $910/t-$930/t FOB.
In the Group II category, prices for 150N edged down by $10-20/t at $420/t-$450/t FOB Asia, while 500N was holding at $530/t-$550/t FOB Asia.
The 4 centiStoke and 6 cSt oils in the Group III segment were assessed at $850/t-$880/t FOB Asia, although some customers were heard to be seeing prices above $900/t FOB Asia, depending on location and volumes, while the 8 cSt grade was steady at $610/t-$630/t FOB Asia.
On the shipping front, additional inquiries started to crop up as the week progressed, with several base oil shipments originating in South Korea. A 4,000-metric ton cargo made up of four base oil grades was expected to cover Onsan to Tianjin, China, for prompt shipment. A 2,000-ton parcel made up of three grades was quoted for Onsan to Godau, Vietnam, for shipment around Jan. 20 as well. A 300-ton parcel was expected to be shipped from Onsan to Wakayama, Japan, around Jan. 20-22 to be delivered Jan 23-25, while a second parcel of 500 tons was also heard for Onsan to Tsurumi, Japan, for late January lifting and delivery between Jan. 25-28. A 2,200-ton cargo of six grades was discussed forOnsan to Dongguan and Shuidong, China, for Jan. 20-30 shipment.
A 3,500-ton parcel was also on the table for Yeosu, South Korea, to Nantong, China, for Feb. 11-15 shipment. A 1,500-ton cargo was being worked on for Yeosu to Jiangyin, China, for Feb. 11-20 lifting. A 2,000-ton parcel was quoted for Yeosu to Taichung, Taiwan, for Jan. 30-Feb. 3 shipment.
Additionally, a 2,450-ton lot of three grades was being worked on for Ulsan, South Korea, to Tanjung Priok, Indonesia, for Jan. 20-30 lifting.
In Japan, a 1,000-ton or 2,000-ton cargo was expected to cover Yokkaichi to Manila, Philippines, for prompt shipment, requiring a Ship Inspection Report (SIRE).
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com
Lubes'n'Greases Publications shall not be liable for commercial decisions based on the contents of this report.