Base oil trading was at a standstill in China and other countries that celebrate the Lunar New Year with week-long holidays, but there were February inquiries noted from buyers in other areas.
However, given the absence of numerous players during the festive period – which started on January 27 – business remained fairly subdued, with few deals being concluded and indications also resting at unchanged levels.
Base stock prices have been moving up on the back of steeper crude oil and feedstock costs and were expected to remain exposed to upward pressure if underlying conditions persisted.
Crude oil futures have edged up since last November, but slipped slightly mid-week on reports by the U.S. Energy Information Administration that showed a larger-than-expected inventory build. The data showed stockpiles increased by 2.84 million barrels last week, a much higher figure than the 1.47 million barrels gain anticipated by analysts.
However, numbers were higher than the previous week, with ICE Brent Singapore March futures settling at $55.56 per barrel on Jan. 26, compared to $54.74/bbl on Jan. 19.
Another factor that continued to buoy base oil values was the tightening of a few cuts, with the heavy-viscosity grades in the API Group II segment heard to be particularly snug on the back of shutdowns and reduced output during the last half of 2016.
The heavy-vis cuts seemed to be in more limited supply for most of last year, but some of the tightness had been relieved in India and China thanks so shipments coming from Europe and the U.S.
However, there were expectations that the U.S. domestic market would experience some tightening of its own in the next couple of months, as two plants were heard to be scheduled for turnarounds.
One is the Excel Paralubes Group II plant in Westlake, Louisiana, and the second one is Chevrons Group II plant in Pascagoula, Mississippi, which were expected to undergo maintenance in March, according to industry sources.
The Excel Paralubes plant can produce over a 1.1 million metric tons per year of Group II oils, which are jointly marketed by Phillips 66 and Flint Hills Resources. The Chevron plant has capacity of over 1.25 million t/y.
The suppliers were heard to be building inventories ahead of the turnarounds and have therefore trimmed spot sales, sources said.
At the same time, it was heard that Taiwanese Group II producer Formosa Petrochemical plans to gradually increase export volumes into China over the next few months. The supplier had cut back spot shipments, following an extended turnaround at its base oils plant in the third quarter of 2016.
As far as Asian spot prices were concerned, given subdued market activity in the region during the week, indications were assessed stable.
On an ex-tank Singapore basis, API Group I solvent neutral 150 was steady at $600/t-$620/t, while the SN500 was holding at $690/t-$715/t. Bright stock was heard at $925/t-$945/t.
The Group II 150 neutral was assessed at $600/t-$620/t, and 500N was unchanged at $775/t-$795/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed at $490/t-$510/t, while the SN500 was hovering at $600/t-$610/t FOB. Bright stock was unchanged at $840/t-$870/t FOB.
Within the Group II category, 150N was heard at $510/t-$530/t, while 500N/600N was holding at $700/t-$720/t, all FOB Asia.
In the Group III segment, there were no fluctuations noted either, with the 4 centiStoke and 6 cSt oils assessed steady at $725/t-$755/t, and the 8 cSt grade heard at $650/t-$670/t, all FOB Asia.
In industry news, a fire that broke out at TonenGeneral Sekiyu’s base oil plant in Wakayama Prefecture on Jan. 22 was extinguished two days later, according to a company press release. The refinery’s 132,000-barrels per day crude distillation unit (CDU) was operational but running at reduced rates, while other units at the plant suspended production (see related story in the Jan. 24 edition of Lube Report Asia).
Another fire had erupted in a storage tank at the refinery during cleaning operations on Jan. 18, but was quickly put out.
“A thorough investigation will be conducted to determine the cause of the incident, and appropriate measures will be implemented to prevent reoccurrence,” the company stated in the press release.
The producer was heard to be making every effort to cover its commitments by shipping base oils produced at other facilities and from other suppliers as well.
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.