Asia Base Oil Price Report

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Spot prices were steady to slightly firmer as rising crude oil values thwarted the downward trend seen in previous weeks. However, lackluster requirements are dampening most opportunities for numbers to move higher.

Despite suppliers inclinations to revise selling ideas up on the back of rising crude oil and feedstock costs, the lack of tangible demand ahead of the year-end holidays – when most buyers prefer to work down inventories rather than add to them – was seen as a roadblock to potential upward movements for a majority of grades.

Discussions were generally thin as most end-users preferred to utilize the stocks at hand and were delaying decisions regarding fresh purchases, although suppliers of API Group II cuts were able to implement modest increases of between U.S. $5 and $10 per metric ton this week on tight availability of these grades.

A majority of base oil segments have seen a decline in demand since mid-year, with the exception perhaps of bright stock in the Group I segment, which seems to have held its own, partly because there are few other cuts that can replace it in certain applications.

However, bright stock prices were capped at current levels given ample supply and reduced demand during the winter months. Participants acknowledged that bright stock prices had experienced more significant price drops compared to the other grades since the middle of the year.

Back in August, when base oil prices in general were on the brink of a slump, bright stock values were hovering at $900/t-$920/t FOB Asia. This week, prices were assessed at around $770/t-$790/t FOB Asia, reflecting a hefty $130/t drop over the last five months, which now seems to be stalling.

In comparison, Group I solvent neutral 150 was gauged at an average of $460/t FOB Asia in early August, with current indications heard slightly higher.

In coming years, however, bright stock may be able to maintain its premium over other Group I cuts as market experts predict a deficit of bright stock due to past and upcoming closures of Group I facilities.

In the high-performance market tier, the new Group III capacity that has come on stream over the last two years, together with additional volumes expected to reach the market in coming months, are anticipated to continue placing downward price pressure on Group III base oils.

Given thin market activity and muted discussions during the week, Asian base oil prices were largely assessed as unchanged from the previous week, with the exception of Group II cuts, which underwent slight upward revisions.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was gauged at $585/t-$605/t, while the SN500 was steady at $665/t-$695/t and bright stock 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 said to be holding at $470/t-$490/t, while the SN500 was heard at $560/t-$580/t FOB. Bright stock was stable at $770/t-$790/t FOB, as mentioned.

Within the Group II category, 150N inched up by $5/t-$10/t to $480/t-$495/t, while 500N/600N was also up by $5/t at $635/t-$655/t, all FOB Asia.

In the Group III segment, the 4 centiStoke and 6 cSt oils were unchanged at $730/t-$760/t, while the 8 cSt grade was heard at $650/t-$670/t, all FOB Asia.

Base stock market players continued to watch crude oil prices closely, as numbers were expected to remain firm if both OPEC and non-OPEC crude producers were able to come to an agreement on an output freeze at a meeting in Vienna, Austria, over the weekend.

Futures rebounded from the weeks lows, with West Texas Intermediate breaching the $50 per barrel mark once again and Brent regaining lost territory.

ICE Brent Singapore February futures were trading at U.S. $56.93 per barrel on Dec. 8, compared to $54.68/bbl for on Dec. 5.

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.

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