Asia Base Oil Price Report


Asia base oil prices seem to be perched on a feeble branch that could snap any minute, letting values fall to lower levels on account of ample supply and lackluster demand.

While prices for a majority of cuts remain largely unchanged from the previous week, sources said that the combination of high operating rates at regional facilities and slower-than-expected off-take in some export markets was starting to exert downward pressure on base stocks.

Additional product entering the Asian supply system was also expected to affect spot pricing. S-Oil reiterated that it hopes to complete the revamping of its Ultra-S base oil plant in Onsan in early November. The company plans to increase its API Group II+ and Group III capacity by 3,000 barrels per day (approximately 150,000 tons per year) to a total of 38,500 barrels per day, and the additional product is likely to be available after the first week of November. Given the current market situation, the producer is expected to be able to offer some spot tonnage after fulfilling its contractual commitments.

Taiwanese producer Formosa was also expected to be able to offer Group II spot cargoes in November, as the company is building inventories following a two-month turnaround, which was completed at the end of September, sources said.

In China, Panjin Northern Asphalt was expected to start up a new 7,200 barrels per day (or 400,000 tons per year) Group II plant at Panjin in November, and there are additional projects slated to come on stream in 2014, local market participants said.

Meanwhile, demand in China has been fairly steady, but requirements in southeast Asia and Taiwan have been weaker than anticipated, sources said.

A Northeast Asian supplier to China said that neither prices nor demand had seen much fluctuation since September, but admitted that the season had been slightly slower than expected and that some prices had softened.

Autumn is typically a time when finished lubes manufacturers ramp up production to meet winter oil change requirements in China. Demand from that segment has been fairly steady, but has not increased as much as everyone had hoped, the supplier said.

Another supplier said that buying interest in China has been quite strong for the high-vis grades, and that these cuts were still in tighter supply than their low-vis counterparts.

At least one Northeast Asian producer said that its October sales volumes to China had been higher than in the previous months. The seller finalized fresh business with customers who do not usually procure cargoes from the supplier, suggesting that other producers might have had limited availability of the high-vis grades.

While the situation in China was fairly steady, base oil suppliers felt that the market had lost momentum elsewhere in Asia, with dwindling inquiries for spot cargoes being a sign of the slowdown.

A seller said that the market was generally soft, and that an expected uptick in demand in October had not materialized. Demand tends to pick up with the arrival of the fall driving season in some countries, but this year, requirements remained rather sluggish, the supplier added.

There has also been little appetite from Europe, where requirements usually flourish after the summer holidays, while an influx of U.S. product into Asia, particularly of Group II cuts, has not only impacted pricing within that segment, but also Group II+/III values, according to sources.

In Japan, Typhoon Wipha caused several refineries to suspend marine shipments during Oct. 15-17. The typhoon was the strongest to hit Japan in ten years, according to the countrys meteorological agency, and caused extensive damage, leaving a death toll of 27 and dozens of people missing. JX Nippon and Idemitsu were two of several companies that suspended shipments during the typhoon, but shipments from the refineries resumed last Thursday.

A company source at Idemitsu said that the Group I, II and III base oils plant in Chiba had not been affected by the typhoon and domestic deliveries were proceeding as scheduled. The company is well-prepared to face adverse weather and is not planning to have a turnaround any time soon, the source added. Idemitsu is mainly focusing on the domestic market, where demand has remained stable over the last few weeks.

Also in Japan, a seller said that buyers were trying to locate some high-vis cuts, but that manufacturers were not able to ship out any additional product as they had limited availability. This could be the lingering result of a minor shutdown at the JX Nippon Group I base oils plant earlier in the year, the seller conjectured, together with recent shutdowns in Korea and Taiwan.

Another typhoon, Typhoon Francisco, is expected to reach Japan’s southern island of Okinawa by Thursday, Oct. 24, after sweeping through the Philippines during the early part of the week.

Prices in Asia were assessed as stable this week, but are likely to continue under downward pressure if conditions do not show significant improvement.

Group I cuts were assessed at $930-$970/t FOB Asia for SN150, at $1050-$1080/t FOB for SN500 and at $1150-$1190/t FOB for bright stock.

Group II material was heard at $1000-$1050/t FOB Northeast Asia for 150N, and at $1100-$1160/t FOB Northeast Asia for 500N.

Group III cuts were assessed at $1040-$1080/t FOB Asia for 4 cSt and 6 cSt, with the 8 cSt cut mentioned at $1020-$1060/t FOB Asia.

On an ex-tank Singapore basis, Group I prices were assessed at around $1000-$1090/t for SN150; SN500 was heard at $1090-$1190/t, and bright stock was heard within a wide range at $1190-$1300/t. Prices varied according to volumes, producer and contract stipulations.

On the shipping front, Korean cargoes continue to steal the spotlight, with 3,000 metric tons expected to be shipped from Ulsan to Taicang during Oct. 25-30. A 1,000-ton parcel was on the market for Ulsan to Dongguan or Shezhen during Oct. 25-30, and a second cargo of 1,300 tons was also discussed for Ulsan to Huizhou on the same dates. A 1,000-ton parcel was likely to move from Onsan to Haiphong on a prompt basis, while a second 600-ton lot was mentioned from the same origin to Singapore for Nov. 1-8 lifting. A third lot of 1,000-1,500 tons base oil was being worked on for Onsan-JNPT (India) for early November loading. A total of 7,250 tons comprised of four grades was likely to be shipped from Yosu to Mumbai on a prompt basis.

Finally, a 3,000-ton parcel was being quoted for Yokkaichi to Tianjin during Nov. 14-18.

Upstream, December ICE Brent Singapore futures were trading at $109.87/bbl at the close of the Asian trading day on Oct. 22, compared with numbers at $110.99/bbl for November futures on Oct 15.

Gabriela Wheeler, based in Japan, can be reached directly at

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other