The dust appears to have settled following the latest round of ex-tank Singapore term price increases initiated by a major refiner, with most price indications assessed as stable this week. Prices were seeing support from tight supply/demand conditions and firm feedstock values. The producer had raised its ex-tank Singapore API Group I and II prices by $20/metric ton, effective June 7, but no further adjustments were heard during the week.
Activity in general was subdued because of the Dragon Boat Festival holidays celebrated in China on June 10-12 and also in Taiwan on June 12. However, even before the start of the holidays, market participants acknowledged that buying interest for imports in China had declined and that this was exerting downward pressure on pricing. Lower prices for transportation fuels in the domestic market also weighed on market sentiment. The National Development and Reform Commission reduced retail gasoline and diesel prices in China by about $15 per metric ton, effective June 7.
As a result of all these factors, prices for some base oil cuts suffered a downward adjustment, with Group II 500N said to have dropped by at least $10/t for June transactions. This was also partly attributed to the imminent start-up of SK Lubricants Group II plant in South Korea, which will mainly produce high-vis grades.
At the same time, base oils supply for other cuts remained strained in the region on account of ongoing and upcoming turnarounds.
In Taiwan, Chinese Petroleum Corp. has shut down one of its Group I production lines at Kaohsiung for yearly maintenance. The turnaround was proceeding as planned, a company source said, but it was mostly affecting the light-vis grades and had resulted in the companys inability to offer spot cargoes in June. Most term obligations were met as scheduled, however, as the supplier had built stocks ahead of the outage.
A second Taiwanese producer plans to shut down its Group II plant in August and September, and is also preparing stocks ahead of the outage. Consequently, the supplier was not participating in the spot market either.
Taiwanese buyers, who source most of their material from local producers, said that supply was adequate despite the shutdowns, and that no shortage of product was noted. Suppliers had hoped to achieve increases for June shipments on the back of tighter availability, but most buyers said that demand had not been as strong as expected, and that the increases had met with resistance.
In India, base oil demand has dwindled because of the start of the monsoon season, which will pose difficulties in terms of logistics and transportation, sources said. At least one Northeast Asian supplier of Group III cuts was heard to have adjusted down prices into India by $30-$60/t to stimulate purchases.
In terms of base oils pricing in Asia, indications for Group I material on an ex-tank Singapore basis were assessed at $1060-$1100/t for SN150, $1120-$1180/t for SN500 and $1210-$1260/t for bright stock this week.
On an FOB Asia basis, prices were heard at $950-$980/t for SN150, $1010-$1060/t for SN500 and $1090-$1140/t for bright stock.
Regarding Group II material, prices were assessed at around $970-$1020/t FOB NE Asia for 150N and at $1050-$1100/t FOB NE Asia for 500N, according to sources.
Group III spot prices were largely stable within a $1030-$1080/t FOB Asia range for 4 cSt, 6 cSt and 8 cSt cuts, but some indications continued to be mentioned at above $1100/t FOB Asia for small-volume transactions.
In production news, SK Lubricants is expected to start up a 300,000 tons/year Group II base oil plant in Ulsan, South Korea, around June 25. The Group II converted production train at the facility will produce heavy 500/600N cuts only, and is initially expected to be run at reduced rates.
On the shipping front, interest to move cargoes ex-Korea has picked up. A 1,500 metric ton parcel of two base oils grades was being worked on for Ulsan or Yeosu to Merak for June dates. A 1,500 ton cargo of 150N was expected to be shipped from Yosu to Shui Dong this month, while a 1,000 ton lot of 600N was discussed for Yosu-Dongguan, also for June dates. Another 2,500 ton cargo of two grades was seen for Yeosu-Shui Dong and Nansha for June lifting.
A 1,900 ton cargo of two grades of base oils was likely to be shipped from Onsan to Singapore during June 25-30, and 7,900 tons were expected to be shipped from Ulsan to Sharjah during June 23-30.
Upstream, July Brent settled in Asia at $103.49/bbl on June 11, compared to $101.61/bbl on June 4. Prices were up week-on-week, but down from the previous session on forecasts that the weekly U.S. stock data would show a build-up in crude inventories.
Gabriela Wheeler, based in Japan, can be reached directly at gabriela@lngpublishing.com.