Asia Base Oil Price Report

Growing base stock supply and weakening seasonal demand, along with the reopening of some regional base oil plants, have all been exerting pressure on spot prices. Volatile crude oil costs are also contributing to the softer tone.

One of the restarts expected to have the most impact is Formosa Petrochemical Corp.s in Taiwan. Formosa was scheduled to resume production at its Mailiao plant in early September after completion of a two-month turnaround. However, no confirmation about the plants operation status could be obtained from the producer.

Formosa can manufacture 600,000 metric tons per year of API Group II oils at its facility in Mailiao, and the producer typically exports large quantities of base oils to its key market, China, and other countries in the region.

At the same time, Chinese imports of Russian Group I oils were expected to be suspended this month due to the turnaround at Rosnefts Group I plant in Angarsk. However, this was anticipated to take place at a time when base oil requirements typically slow down, which should lessen the impact of the import reductions.

Buyers and sellers price ideas are currently separated by a large gap and negotiations for September shipments seem to be progressing at a sedate pace.

Sellers have adjusted offers down in an effort to encourage orders, but buyers remain hesitant about committing to large cargoes on concerns that prices might decline in coming weeks.

Fluctuating crude oil values emphasized the feeling of uncertainty. Crude oil futures were trekking downward for most of the week, but recovered after data from the United States showed a significant drawdown in crude stocks, thought to be due to a storm that threatened to impact production.

West Texas Intermediate rose by more than 1.5 percent as the U.S. government reported that 11.5 percent of Gulf of Mexico output was shut down as a precautionary measure.

Oil futures were also boosted by robust trade data from China, which showed its crude imports in August surged by nearly a quarter from a year ago to the second-highest amount ever, driven by independent refiners rushing to cash in on low oil prices before import quotas expire in December, Reuters reported.

ICE Brent Singapore November futures were trading at U.S. $47.47 per barrel in afternoon sessions on September 12, compared to $48.41 per bbl on Sept. 5.

On the base oils side, the downward pressure seems to be more prevalent on heavy-viscosity grades, with Group I solvent neutral 500 and bright stock as well as Group II 500 neutral export values edging down between $40 and $50 per metric ton from a month ago. High vis cuts see less demand for blending formulations during the cold months.

In Taiwan, domestic list prices have also been revised down by Formosa. The producer reduced its Group II 500N list prices for September orders by New Taiwan dollar 1.68 per liter compared to August values. Due to similar market conditions, the producer had also adjusted down list prices in August.

Given current market fundamentals amid prospects of continued downward pressure, Asian base oil prices were assessed as stable to soft this week.

On an ex-tank Singapore basis, the Group I SN150 cut was steady at $590/t-$610/t, while the SN500 was assessed at $670/t-$700/t. Bright stock edged down by $10/t to $930/t-$950/t.

The Group II 150N was holding at $590/t-$610/t, while the 500N was steady at $770/t-$790/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $480/t-$500/t, and the SN500 was unchanged this week at $590/t-$610/t FOB. Prices for bright stock were steady at $790/t-$810/t FOB, following a $10/t drop the previous week.

In the Group II category, the 150N cut was holding at $530/t-$550/t FOB Asia, while the 500N/600N was also unchanged at $680/t-$700/t FOB Asia.

Within the Group III tier, the 4 centiStoke and 6 cSt oils were lower by $10/t at $810/t-$840/t FOB Asia, while the 8 cSt grade was also down by $10/t at $650/t-$670/t FOB Asia on ample supply and competitive offers.

In shipping industry news, adverse weather hit several ports in South Korea and China and disrupted schedules and caused congestion, resulting in less availability of vessel space due to the delays, sources said.

Returning to regular schedules may take several weeks and freight costs may increase if space continues to be limited, sources added.

In other shipping-related news, ExxonMobil published a report that examines the future of cylinder lubrication and provides advice to help vessel operators make informed decisions regarding their current and future cylinder oil choices, Marine Propulsion and Auxilliary Machinery reported.

More stringent environmental regulations and a move to slow steaming continue to complicate engine operations and require the use of specific cylinder lubricants. The report provides cylinder oil best practices, which can help minimize maintenance and optimize engine operation through the selection of the most appropriate lubricant.

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.