The Asian base oil market was slowly coming back to life after local holidays, with suppliers holding hopes that demand picks up with the start of the spring season.
Buying interest had remained fairly subdued before the festive period, as consumers had assumed a cautious stance given the constant price fluctuations and uncertainties about market direction.
The majority of business had been limited to smaller cargoes aimed at meeting immediate needs, but sellers expected buyers to return to the market to replenish stocks as these have been kept at fairly lean levels.
Several producers had revised down domestic offers at the beginning of the month to capture more requirements, protect market share, and limit the influx of imports.
In India, local producers were heard to have revised down domestic list prices down as of Feb. 1 for the month’s shipments of API Group I oils.
Taiwanese producer Formosa Petrochemical also lowered its domestic list prices for Group II base oils on sliding crude oil prices, currency movements, and lukewarm buying interest.
In Japan, base oil market fundamentals have been affected by the decline in crude oil values, domestic economic uncertainties, and a slowdown in the Chinese economy, given that a number of Japanese producers have expanded their presence in this country.
The Japanese economy struggled along in December, with industrial production data showing a much larger decline than expected – a 1.4 percent drop on the previous month compared with expectations of a 0.3 percent fall – while the slump in oil prices weighed on inflation, the Financial Times reported.
The Bank of Japan’s governor, Haruhiko Kuroda, surprised markets on Jan. 29 with the introduction of negative interest rates, announcing that it would start charging private sector lenders a penalty of 0.1 percent to hold onto their excess cash, or reserves.
The new policy is intended to stimulate the economy, which narrowly avoided falling into recession last quarter. Kuroda hopes to encourage banks to lend cash more freely and get businesses and households to spend, but the move was seen with skepticism by investors and analysts alike, according to media reports.
In view of the general market conditions and the slump in crude oil values, Japanese base oil producers and South Korean exporters adjusted down base oil prices for the January-March time frame.
According to sources, JX Nippon lowered domestic base oil prices by an average of Japanese yen 16.2 per liter; Idemitsu by 15.9/liter; and Cosmo Oil by 12 /liter. Korean supplier SK trimmed prices by 11.4/liter and S-Oil by 11.5/liter.
Finished lubricant manufacturers have followed with price cuts of their own. It was heard that Idemitsu reduced Jan. and Feb. prices by 8/liter and JX Nippon trimmed Jan. prices by 6.9/liter. Confirmation about the decreases could not be obtained from the producers directly.
Meanwhile, Asian market participants continued to focus much of their attention on crude oil price fluctuations, as numbers continued to move down.
Crude oil futures fell late in the week, pushed by record U.S. crude inventories, concerns about demand prospects, and Goldman Sachs predictions that prices would remain low and volatile until the second half of the year.
ICE Brent Singapore futures were trading at $33.22 per barrel in afternoon sessions on Feb. 15, compared to $34.46 per bbl on Feb. 8.
Asia base oil prices were notionally assessed unchanged this week as trading was still rather subdued and few fresh transactions were reported.
Within the Group I category, SN150 was heard at $540 per metric ton-$570/t ex-tank Singapore, SN500 was heard at $610/t-$630/t and bright stock at $990/t-$1,010/t.
Group II 150N was holding at $510/t-$530/t ex-tank Singapore, while the 500N was steady at $660/t-$680/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $420/t-$450/t, while SN500 was heard at $430/t-$460/t FOB. Bright stock prices were holding at $890/t-$910/t FOB.
In the Group II category, prices for 150N were still hovering at $420/t-$450/t FOB Asia, and 500N at $510/t-$530/t FOB Asia.
Group III grades were steady, with 4 centiStoke and 6 cSt oils gauged at $850/t-$880/t FOB Asia, and the 8 cSt grade at $600/t-$620/t FOB Asia.
The holidays had a dampening effect on the number of shipping inquiries that surfaced during the week, with only a handful of cargoes being discussed. For cargoes ex-South Korea, a 9,500-11,000-ton lot was mentioned for Onsan to Mumbai, India, for mid-Feburary lifting. An 800-ton parcel was on the table for Ulsan to Nantong, China, for Feb. 23-27 shipment.
In Japan, a 2,000-ton cargo was expected to cover Mizushima to Singapore or Merak, Indonesia, for Feb. 16-20 lifting, requiring a ship inspection report (SIRE).
Three COAs were still quoted from last week: one involving approximately 2,000 tons to cover Yeosu to Merak, a second for 2,000 tons for Yeosu to Tanjung Priok, Indonesia, and a third for about 1,000 tons for Yeosu to Vietnam.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com
Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.