Asia Base Oil Price Report

A lack of enthusiasm appeared to characterize the base oil market in Asia this week, with sellers seemingly reluctant to step out with offers due to crude oil volatility, and buyers waiting for prices to drop.

Plentiful availability for most base oil grades also continued to dampen buying appetite and place downward pressure on price ideas.

While suppliers were expecting consumers to stock up ahead of the Lunar New Year holidays starting in early February, demand has not improved significantly. However, sellers were hopeful that it would, following the festivities, as end-users might return to the market to rebuild depleted inventories.

While this situation was mostly evident in China, demand for imports has also fallen off in India, where buyers had stocked up ahead of the year-end holidays with purchases of competitively-priced cargoes from the Middle East, South Korea and to some extent, the United States.

Indian base oil consumers still rely heavily on imported material, but the return to production of a local producer may reduce the need for imports slightly in coming weeks.

It was heard that Bharat Petroleum Corp. Ltd.'s API Group II base oil plant, which had been out of commission since mid-2018 due to a fire, would be restarted at the end of the month, bringing back approximately 180,000 metric tons per year of Group II base oils into the supply system.

For the time being, however, it appeared that there were several offers of both Group I and II cargoes loading ex-U.S. to India still on the table.

Demand in Asia was anticipated to pick up following the Lunar New Year, and this, together with operating rates cutbacks and turnarounds, may help bring supply closer to a balanced position than the current situation.

Producers were heard to be considering diverting feedstocks for base oil output into the gasoil stream as prices have strengthened over the last couple of weeks, and offer more attractive margins. This would lead to reduced base stock production.

However, the inception of additional material from new plants in China and the expansion of ExxonMobil's Singapore unit in the next couple of months may tip the balance further towards an oversupply point.

The start-up of the ExxonMobil Group II plant in Rotterdam, the Netherlands, in the next few weeks, would also likely mean that less product would be shipped out of Asia to Europe to meet the company's downstream requirements there.

Both buyers and sellers were monitoring developments in the crude oil market, as a change in the price direction of raw materials would likely determine whether base oil prices stabilize, move up, or deteriorate further, although most participants agreed that the supply/demand factor weighed heavily.

Crude oil futures fell on Thursday as U.S. crude production neared an unprecedented 12 million barrels per day, fueling concerns about global oversupply as there are signs that demand may be weakening.

However, there were reports that OPEC significantly trimmed its crude oil production in December ahead of the implementation of an official plan to hold back output as part of an effort to reduce global oversupply and boost crude prices.

On Jan. 17, Brent March futures were trading at $60.43/bbl on the London-based ICE Futures Europe exchange, down from $60.97/bbl on Jan. 10.

Spot base oil prices in Asia this week were assessed as stable-to-soft, with the ex-tank Singapore prices adjusted to reflect recent price reductions by a major refiner.

Some of the FOB indications were also revised to portray business that is being done within the published ranges widely accepted as benchmarks in the region.

Ex-tank Singapore prices for Group I solvent neutral 150 were unchanged at $750-$770/t per metric ton, while SN500 was adjusted down by $10-20/t to $750/t-$790/t. Bright stock was steady at $880/t-$900/t, all ex-tank Singapore.

Group II 150 neutral moved down by $10-30/t to $750/t-$800/t and 500N was down by $30/t at the low end of the range at $760/t-$810/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was notionally assessed down by $20/t at the low end of the spread to $650/t-$690/t, while SN500 saw a significant downward adjustment of $50/t to $630/t-$650/t. Bright stock inched down by $20/t to $780/t-$800/t, FOB Asia.

A transaction involving a bright stock cargo from a Southeast Asian supplier was heard to have been concluded at around $780/t FOB Asia, bringing the relatively stable bright stock range slightly down this week.

Group II 150N was lower by a heftier $60/t at $600/t-$620/t FOB Asia, while the 500N and 600N cuts were also assessed down by $60/t to $640/t-$660/t, FOB Asia.

In the Group III segment, the 4 centiStoke grade was down by $20/t at the lower end of the range to $820-$860/t and the 6 cSt edged down by $30 at the low end of the spread to $830/t-$880/t. The 8 cSt grade was unchanged at $710/t-$740/t, FOB Asia. The presence of competitively-priced material from the Middle East continued to place pressure on regional indications, sources noted.

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

LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.