Asia base oil spot prices were mostly flat on sluggish demand and snug supply levels, although some grades continued to be exposed to downward pressure on account of increasing availability.
Most market sources seemed to concur that the category experiencing the most pressure was the API Group III segment, as it continues to be impacted by oversupply amid more limited requirements as compared to other grades.
The recent inception of Group II/III material from the fairly new Abu Dhabi National Oil Companys plant in Ruwais, United Arab Emirates, has resulted in more of these cuts being available at very competitive prices in different regions, including Asia and the U.S.
While a number of sources maintained that the use of this material would be limited until more approvals were granted, others were of the opinion that some small blenders and independent manufacturers who did not need these approvals would be able to purchase these base oils.
Indeed, it was heard that China had begun to import Group III cargoes from ADNOC, with over 10,000 tons heard to have been concluded in November. There were rumblings that these cargoes had been agreed in the U.S. dollars $580s-590s per metric ton, CFR China, but this could not be confirmed. Sources added that ADNOC was able to offer attractive prices because its production costs were lower than other producers’.
In India, values for regional Group II cuts have also lost ground given the availability of lower-priced Group III cargoes from the Middle East that can replace some of the pricier Group II cuts.
A couple of ADNOC cargoes were also heard to have been fixed into the U.S. in the last couple of months at a similar price point to the cargoes discussed in Asia, with a third large parcel scheduled to arrive shortly.
As a result, Group III grades of Northeast Asia origin have come under pressure, with the 4 centiStoke and 6 cSt cuts reflecting the steepest drops from a month ago.
Numbers for the 4cSt and 6cSt cuts being reported hovered near $730/t-760/t, FOB Asia, compared to levels assessed around $790/t-$820/t, FOB Asia, on Oct. 18. Spot offers for November shipment from Northeast Asian suppliers were mentioned at $740/t-760/t FOB Asia, while bids were $10/t-20/t below those numbers.
Meanwhile, other segments of the market saw less upheaval, with the characteristic sluggish demand at the end of the year hampering the conclusion of business, and prices remaining largely unchanged.
Group I base oils spot prices were largely maintained from the previous week, and even bright stock – which had suffered the brunt of downward adjustments in recent weeks – was heard to be enjoying a more stable position.
In the Group II segment, requirements were also generally muted, but spot prices held steady due to snug supply. While the heavy-viscosity cuts had been exposed to the most pressure in recent weeks on the back of dwindling demand during the winter months, regional producers reported limited spot volumes for November shipment amid steady pricing.
Some sources speculated that this was due to output cutbacks, or the fact that some refiners were concentrating on the production of transportation fuels instead of base oils to optimize operations.
Discussions for December shipments were expected to gain traction in the next couple of weeks, although participants were aware that buyers have adopted a cautious attitude as price direction remained quite unpredictable.
While some Asia base oil assessments remained unchanged, a few cuts were revised downwards in order to reflect the latest discussions and market sentiment.
On an ex-tank Singapore basis, API Group I solvent neutral 150 was steady at $585/t-$605/t, while the SN500 was holding at $665/t-$695/t. The bright stock price range was also unchanged at $910/t-$930/t.
The Group II 150 neutral was assessed at $585/t-$605/t, and 500N at $760/t-$780/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $470/t-$490/t, while the SN500 was hovering at $560/t-$580/t FOB. Bright stock was also steady at $770/t-$790/t FOB.
In the Group II category, 150N was gauged at $470/t-$490/t, while 500N/600N was assessed at $630/t-$650/t, all FOB Asia.
Some price adjustments were reflected in the Group III segment, with the 4 centiStoke and 6 cSt oils moving down $20/t to $730/t-$760/t on competitive activity as mentioned above, while the 8 cSt grade was unchanged at $650/t-$670/t, all FOB Asia.
Upstream, crude oil futures registered gains of up to $1 per barrel as expectations of an OPEC production freeze outweighed oversupply concerns. However, a stronger dollar capped these gains.
Saudi Energy Minister Khalid Al-Falih appeared optimistic that the Organization of the Petroleum Exporting Countries would reach an agreement in an upcoming meeting, based on a preliminary output deal discussed in Algeria in September.
ICE Brent Singapore January 2017 futures were trading at U.S. $47.63 per barrel on Nov. 21, compared to $46.78/bbl on Nov. 10.
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.