Asia Base Oil Price Report

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A major Southeast Asian refiner has slashed its API Group I and II Singapore ex-tank term prices by $10-$30 per metric ton, effective Nov. 29, due to a combination of factors including weakening demand, ample supply and volatile crude oil and feedstock costs, market sources said.

While other Asian suppliers were heard to have lowered their spot offers for December shipments, there was no confirmation whether other producers would follow the majors lead and cut term prices as well.

Participants said that prices for spot transactions were being pressured down by plentiful availability and a need to reduce inventory levels ahead of the year-end tax reviews, and that December cargoes were being discussed at decreases of at least $10-$20/ton.

Two Northeast Asian producers said they were in negotiations with buyers, but they had not concluded December deals because they were still evaluating market conditions. The suppliers expected to finalize business over the next few days.

A number of consumers said they had received calls from suppliers to offer them December cargoes, but buyers were reluctant to commit to large quantities. Furthermore, many buyers were staying on the sidelines, hoping that prices would drop.

One of the suppliers conceded that spot prices had softened, but that this was not unusual for this time of the year because demand typically slows down and suppliers have to find ways of enticing buyers to take cargoes.

In the Group I segment, it was heard that SN500 had changed hands at lower prices in the last few weeks, with reductions of $30-$50/ton mentioned, depending on the base price. Current SN500 indications were hovering at $1020-$1050/t FOB Asia, according to sources.

Market players said that it was interesting that prices of SN500 had dropped, because this cut had been holding steadily for most of the year, as it had been in tighter supply than the low-vis grades. However, availability was said to have improved, along with that of other Group II high viscosity grades, which had been snug earlier in the year as well.

On the other hand, a Taiwanese supplier said that it had found a home for all of its November and December Group II tonnage and that the cargoes had been sold to China at a premium of at least $10/ton over those published prices that are widely used as a benchmark for negotiations. The supplier explained that buyers had been willing to pay higher prices because they needed the product as their stocks were running low.

Sources said it was not surprising that the producer had been able to sell all of its production because the seller enjoys a price advantage in the Chinese market due to its proximity and long-term relationship with some of the customers.

Prices in Asia were assessed as stable-to-soft this week. Within the Group I segment, SN150 was heard at $920-$970/t FOB Asia, SN500 at $1020-$1050/t FOB Asia as mentioned above, and bright stock was heard at $1130-$1170/t FOB. SN150 and bright stock reflected a $10/ton decrease week-on-week, while SN500 slipped by $30/ton.

Group II material was assessed at $970-$1030/t FOB Asia for 150N, and $1090-$1140/t FOB Asia for 500N, also showing a $10/ton drop from a week ago.

Group III prices were largely unchanged, with numbers heard at $1030-$1080/t FOB Asia for 4 centiStoke and 6 cSt, and $1010-$1060/t FOB Asia for the 8 cSt cut.

Aside from the fact that demand has slowed down and most plants were running at full rates, the influx of additional capacity into the Asian market from S-Oils revamped Group II/III plant in Onsan, South Korea, had been also expected to have an impact on the regions supply/demand balance. The revamping project was completed in early November, and the producer was able to offer product by mid-month.

However, S-Oil has been able to place most of its production because some term customers have increased the volumes they take, and the supplier has also been able to sell additional spot cargoes, a company source said. The plant had been running at reduced rates while the expansion work was being completed and some customers had been placed on allocation, which has now been lifted, the source added.

Another element that was contributing to the downward pressure was the imminent arrival of lower-priced cargoes from the U.S., particularly into India, and recent shipments from Russia into China.

In India, Group II cargoes of U.S. origin were heard to have been concluded at $980-$1020/ton CFR India for 150N, while 500N was quoted at $1100-$1140/t CFR, although this could not be confirmed with the suppliers.

In China, around 10,000 tons of Russian Group I cuts were booked for November delivery, and although the volumes were slightly lower than those shipped in October, the competitively-priced cargoes were said to have had an impact on pricing. Some of these cargoes were sold at decreases of up to $30/ton, sources said.

On the shipping front, there was a flurry of inquiries this week, mostly to move product ex-Korea. A 1,000-metric ton cargo of base oil was expected to be shipped from Onsan to Tianjin during Dec. 18-22. A large 8,400-ton lot composed of three grades was being discussed from Ulsan or Yosu to Port Khalid, Sharjah during Dec. 1-15. A 2,250-ton parcel of three grades was likely to move from Ulsan or Yosu to Koh Si Chang, Thailand between Nov. 28 and Dec. 5. A 1,100-ton lot was on the table for Ulsan or Yosu to Ho Chi Minh during Dec. 5-15. A 1,500-ton cargo of two grades was expected to be shipped from Ulsan or Yosu to Merak between Dec. 20 and Dec. 31. A 4,000-ton parcel was being worked on for Yosu to Mumbai for prompt shipment.

In Taiwan, a 3,000-4,000-ton cargo made up of three grades was likely to be shipped from Mailiao to Mumbai during Dec. 20-30.

Finally, a 1,200-ton lot was being considered for Hong Kong to Ningbo for end of November through early December shipment, while a large 6,700-ton parcel was on the table from the same origin to Zhuhai, Zhapu, Ningbo and Tianjin, for similar shipment dates.

Upstream, January 2014 ICE Brent Singapore futures were trading at $110.62 per barrel during the Asian trading day on Nov. 19, compared with numbers at $108.06 per barrel on Nov. 19.

Gabriela Wheeler, based in Japan, can be reached directly atGabriela@LNGpublishing.com.

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