Given persistent tight conditions for these cuts, however, suppliers have been able to shore up pricing to a certain extent, despite the emergence of bids at U.S. $20-$30 per metric ton below levels seen two weeks ago.

Lower feedstock and crude oil numbers offered further incentive for buyers to seek base oil markdowns, but it was difficult to predict whether the trend would continue, as crude values remained extremely sensitive to global refined products supply and demand balances, a stronger U.S. dollar, and geopolitical tensions.

Another element that seemed to be encouraging buyers to present lower buying ideas was the expectation that Group II availability would improve once Taiwanese producer Formosa Petrochemical resumed production at the end of August, following a two-month turnaround. Formosa can produce 600,000 metric tons per year of Group II oils at its facility in Mailiao, according to LubesnGreases Guide to Global Base Oil Refining.

The producer is likely to need time to rebuild inventories and resume its regular spot shipments into different Asian destinations, including China, but an expected decline in demand in the next couple of months was expected to partly offset the reduced availability.

Base oil demand from the finished lubricants sector was anticipated to see some softening in China in August and September, but was likely to pick up again at the start of the fourth quarter, according to sources.

Requirements from Chinese end-users has been down because buyers and importers secured overseas cargoes a few months ago, and many of these shipments arrived in June or July.

Expectations of improved spot supply from Taiwan in coming weeks, along with the perception that most plants are currently running at optimum rates, and the inception of added capacity to the system, all exerted pressure on price ideas.

Shandong Hengrunde restarted its 200,000 t/y plant in Shandong province in late July after completing a maintenance turnaround that lasted slightly over a month.

It was also heard that China National Offshore Oil Co. expected to start production at its new 400,000 Group II base oil plant in Taizhou, China, in September. The plant, located in Jiangsu province, was originally expected to start up at the end of 2015, but commercial product was not expected to be available until next month.

The plant utilizes Chevron Lummus Global, LLC isocracking, isodewaxing and isofinishing technologies to produce base oils, according to a company press release, and is anticipated to supply 100,000 tons of base oil to Sinopec Lubricant Co., a subsidiary of China’s largest oil refiner, Sinopec Corp.

Base oil trading was generally subdued in Asia as the market moved into August, with a few transactions reported near the low end of the ranges and some grades seeing downward adjustments on prevailing discussion levels.

At the same time, a number of assessments saw upward revisions in the various segments to bring numbers more in line with current transactions.

Group II producers have been trying to maintain numbers as most cuts remain fairly tight throughout the region. For the 150N, for instance, offers were heard above the $600/t FOB Asia mark, but bids were substantially below that level at $560/t-$570/t FOB.

A Group II deal for 500/600N was heard concluded for late July shipment at the low end of the prevailing price range at $720/t FOB Asia, despite offers still hovering near the $740/t-$750/t FOB levels.

In the Group III segment, 4 centiStoke and 6 cSt values were adjusted down on the back of oversupply conditions and tentative demand, while the 8 cSt was assessed up on current transaction levels.

On an ex-tank Singapore basis, the Group I SN150 and SN500 grades were adjusted up by $20/t to $550/t-$570/t and $660/t-$680/t, respectively. On the other hand, bright stock was lower by $20/t at $1,010/t-$1,030/t given subdued buying interest.

The Group II 150N was also up by $20/t at $590/t-$620/t, and the 500N was assessed higher by $20/t-$30/t at $780/t-$800/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed unchanged at $450/t-$470/t; the SN500 was also steady at $620/t-$640/t FOB.

Bright stock edged down by $30/t to $910/t-$930/t FOB, with some bids also heard as low as the mid-$800s/t, but deemed unworkable by suppliers.

In the Group II category, the 150N cut was assessed at $550/t-$570/t FOB Asia, while the 500N/600N was holding at $720/t-$740/t FOB Asia.

Within the Group III tier, the 4 cSt and 6 cSt oils were adjusted down by $20/t to $840/t-$870/t FOB Asia, while the 8 cSt grade moved up by $30/t to $640/t-$670/t FOB Asia.

Upstream, crude oil futures moved down throughout the week – hovering at three-month lows – following several weeks of steady upward momentum.

In June, West Texas Intermediate had nearly doubled its value, closing at a 2016 high of $51.03 per barrel on June 8 after reaching a low of $26.21 on February 11, according to media reports.

Unexpected builds in crude and gasoline inventories in the U.S. despite the peak summer driving season, and the Federal Reserve’s announcement that it would leave its interest rates unchanged, prompted futures to move down during the week.

Producers continued to pump more oil than needed and this, coupled with downcast global economic growth prospects, will likely continue to exert downward pressure, analysts said.

ICE Brent Singapore October futures were trading at $43.30 per barrel in afternoon sessions on August 1, compared to $47.27 per bbl on July 21.

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

LNG Publishing shall not be liable for commercial decisions based on the contents of this report.