As crude oil values have edged down since the beginning of the year, base oil buyers are concerned that the decreases could be reflected in base stock prices in the upcoming weeks.

Continuing with the prevailing trend over the last two weeks, crude futures edged down on Monday, pressured by another weekly increase in the U.S. oil rig count and uncertainty over whether OPEC members would continue to adhere to production cuts in the second half of the year.

ICE Brent Singapore May futures settled at $50.48 per barrel on March 27, compared to $51.60/bbl on March 20.

Despite the significant part that crude oil values play in base oil pricing, the limited availability of a number of base oil grades appears to be having a major impact on spot indications as an extremely busy turnaround schedule in Asia and other regions is constricting spot trade.

The plants that are currently undergoing turnarounds or will be taken off-line in the next few months include ExxonMobil’s large API Group II base oils plant in Jurong, Singapore, which was heard to be on turnaround from the end of February to early April; and GS Caltex’s Group II plant in Yeosu, which is in the middle of a 40-day turnaround that started in mid-March.

In China, Sinopec Maoming was heard to have shut down its Group I/II base oils unit for maintenance work in mid-March.

In Japan, several base oil units will also be undergoing maintenance shortly, while one facility has been crippled by a fire earlier this year. TonenGeneral Sekiyu K.K. will not be able to resume full production at its Wakayama refinerys Group I plant until the end of the year as it is rebuilding the equipment damaged by the fire.

Idemitsu Kosan will be shutting down its Group I/II refinery in Chiba for maintenance from mid-April to late June, while JX Nippon was heard to be planning to shut down its Group I plant in Mizushima for two and a half months beginning in early May. The company’s second base oil unit in Mizushima will not be affected.

There were also reports that Cosmo Oil would be performing a turnaround at its Group I plant in Yokkaichi for two months, starting in June.

Also in June, South Korean producer SK Lubricants will be taking its large Group II/III plant in Ulsan off-line for a three-week turnaround at the start of the month.

Meanwhile, Thai producer IRPC has restarted operations and is running its Group I plant at full rates following a scheduled turnaround that started in February, according to sources.

The fact that there are not enough cargoes to cover all spot requirements is keeping prices at firm levels and is likely to continue exerting upward pressure on prices, sources said.

Some buyers are not as concerned about price levels as they are about difficulties in locating sizeable cargoes, given the persistent tight supply.

At the same time, demand in China has been less vibrant than previously anticipated, as activity in the downstream lubricants market appears to be slightly more sluggish than in the spring of previous years.

This could be partly attributed to an overall slowdown in the Chinese economy and uncertainties over lubricant demand from segments such as the automotive industry.

Nevertheless, it was heard that offers into China from certain origins such as the Middle East have edged up, with Group III discussions commanding higher numbers for April shipments.

Likewise, base oil indications into India have moved up in the last couple of weeks, as supply from regular sources such as Iran has tightened, affecting Group I pricing in particular.

Availability of Group II cuts from the U.S. has also been more limited in India in recent months because prices have not been as competitive and also because of ongoing and upcoming turnarounds at U.S. base oil facilities.

Higher Group III values have also been reported as a result of more limited availability of spot cargoes due to the ongoing shutdown at the Shell-Qatar Petroleum Pearl GTL Group III facility in Ras Laffan, Qatar, which has been ongoing since late December.

Meanwhile, it was heard that another Group III producer in the Middle East, Abu Dhabi National Oil Company (ADNOC), is preparing to ship large cargoes into Asia. ADNOC operates a 100,000 t/y Group II and 500,000 t/y Group III base oil plant in Ruwais, United Arab Emirates, and has been exporting substantial amounts of product to Asia, Europe and the U.S. since its start-up last year.

Given the current limited availability of certain base oil grades and the fact that buyers are being conservative about volumes being purchased on account of potential price fluctuations, the number of transactions was limited during the week and prices were stable to firm.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was steady at $680/t-$700/t. SN500 was assessed up by $10/t at $820/t-$835/t, and bright stock at $980/t-$1,000/t ex-tank Singapore.

Group II 150 neutral was also up by $10/t at $690/t-$710/t, while the 500N cut edged up by $10/t to $865/t-$885/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $550/t-$570/t, the SN500 at $750/t-$770/t FOB, and bright stock at $890/t-$910/t FOB.

Group II base oils were slightly up, with the 150N assessed at $610/t-$630/t and the 500N/600N at $810/t-$830/t FOB Asia, reflecting a $10/t increase from last week.

In the Group III segment, the 4 centiStoke and 6 cSt oils were holding at $740/t-$760/t, and 8 cSt was hovering at $710/t-$730/t, all FOB Asia.

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.