Softer crude oil values have lifted some of the upward pressure on base oil spot prices in Asia, but numbers still remained on fairly firm ground because of tight overall supply conditions.
Buyers were heard to be looking for product from several different sources, not confined to Asia, as sizeable cargoes of certain grades were difficult to locate.
A string of ongoing and upcoming turnarounds in Asia, together with outages in other regions, was cited as one of the main reasons for the tight supply and demand.
In Singapore, ExxonMobil was heard to have taken its API Group II base oils plant in Jurong off-line at the end of February for approximately 40 days of maintenance work. The unit has capacity to produce more than 1.5 million metric tons per year of base stocks, according to LubesnGreases Guide to Global Base Oil Refining.
In China, Sinopec Maoming was expected to shut down its base oils unit for maintenance work in mid-March. The unit can produce 303,300 t/y of Group I oils, 100,000 t/y of Group II cuts, and 300,000 t/y of Group III oils. The unit was upgraded in June 2016.
At the same time, in South Korea, GS Caltex’s Group II plant was also heard to be undergoing a 40-day turnaround, which started in mid-March, significantly affecting the availability of Group II cuts moving forward, as the facility can produce more than 1.1 million t/y per year of Group II oils.
Also in South Korea, SK Lubricants confirmed that its Ulsan plant will be taken off-line for a turnaround in early June. The facility can produce 701,000 t/y of Group II and 1,267,000 t/y of Group III base oils and is anticipated to be idled for about three weeks.
The SK Lubricants turnaround comes on the heels of an ongoing shutdown at the Shell-Qatar Petroleum GTL Pearl Group III facility in Ras Laffan, Qatar. The Pearl plant has capacity of 1,072,000 t/y of Group III oils and was heard to have been experiencing production problems since last December due to issues in the gasifier units.
Large Group III base stock volumes from the Pearl plant are regularly exported to Asia and other regions, but the flow of product was halted and this has narrowed availability of Group III oils, which had until recently been oversupplied.
While most of the producers who would be undertaking planned turnarounds were expected to build inventories to cover contractual obligations during the outages, spot availability was expected to be reduced in Asia.
Indeed, it was heard that Taiwanese Group II producer Formosa Petrochemical would likely stop offering spot tonnage for export because the producer makes its priority to cover the growing base oil demand within the domestic market.
Formosa was also reported to have increased its list prices for domestic transactions moving forward, a second such hike this month alone. The first hike was implemented for transactions taking place during the first half of March.
Formosas Group II 70 neutral grade was adjusted up in New Taiwan Dollar by 77 cents per liter, its 150N grade by NT$1.27/liter and its 500N base oil by NT$1.08/liter, with all of the increases going into effect on March 15.
The high-viscosity grades in particular seem to be in limited supply in Asia, while some of the lighter viscosities are also tilting towards the tight side, which has resulted in upward price revisions since February.
Within the heavy-vis category, bright stock has moved up slightly, but the increases have been more moderate than for other cuts because demand had been fairly sluggish until now.
The subdued buying interest was thought to have been caused by consumers having stocked up at the end of the year and during the first part of the quarter as they expected values to go up in the spring.
However, some buyers have come back to the market only to find out that prices have moved up by at least U.S. $10 per metric ton, upwards of $20/t, week on week.
In general terms, spot prices in Asia were assessed stable to firm this week, as offers continued to edge up on account of the current tight supply and demand conditions.
On an ex-tank Singapore basis, API Group I solvent neutral 150 inched up by $10/t to $680/t-$700/t.
SN500 was also adjusted up by $10/t at the low end of the prevailing range to reflect discussions at $810/t-$825/t. Bright stock edged up by $5/t to $980/t-$1,000/t ex-tank Singapore.
Group II 150 neutral was steady at $680/t-$700/t. The 500N cut was also unchanged at $855/t-$875/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was adjusted up by $10/t to $550/t-$570/t, while the SN500 moved up by $20/t to $750/t-$770/t FOB. Bright stock edged up by $10/t to $890/t-$910/t FOB.
Group II base oils were stable to firm, with the 150N hovering at $600/t-$620/t, and the 500N/600N inching up by $10/t to $800/t-$820/t – all FOB Asia.
In the Group III segment, the 4 centiStoke and 6 cSt oils were assessed stable at $740/t-$760/t, but the 8 cSt was up by $10/t at $710/t-$730/t, all FOB Asia.
Upstream, crude oil values fell on Monday, erasing some of the prior weeks gains, as an increase in the U.S. oil rig count spurred concerns over growing domestic production and oversupply, while some analysts worried that a change to the G-20 policy statement may impact global trade.
ICE Brent Singapore May futures settled at $51.60 per barrel on March 20, compared to $51.31/bbl on March 13.
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.