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June 9, 2015

Volume 7 Issue 4

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Asia Base Oil Price Report

Prices in the Asian base oils market were largely steady, with trading heard to have waned as many participants headed to the ICIS Base Oils conference in Singapore June 9-11.

Most market talk continued to center on the fact that the heavy-viscosity oils remained tight throughout the region.

Although some base oil cargoes have made it into India and other destinations in Asia from the United States, Europe and the Middle East, relieving some of the lack of regional availability, supply from some of these sources has started to dry up.

This was partly attributed to heightened demand in the domestic market of the respective exporting countries, together with reduced output at some facilities because refiners have streamed feedstocks into fuels production rather than base oil, as margins have been more favorable.

Furthermore, large quantities of base oils were exported in the earlier part of the year, allowing producers to attain more balanced inventories. Producers in the U.S., for instance, reported snug supply of the heavy cuts in both the API Group I and II segments.

At the same time, the light-vis cuts remain plentiful in the U.S., which has driven some suppliers to cut prices of these grades to encourage purchases, while some producers have increased the values of the heavy-vis cuts.

One of these producers is Motiva, which lowered the posted price of its Group II 110 vis grade by U.S $0.10 per gallon and raised its 600 vis by $0.18 per gallon on June 5. Prices for its mid-vis cut remained unchanged.

Similarly, in Southeast Asia, a major refiner will be lifting the list price of its Group I and II heavy-vis cuts (including bright stock) by U.S. $20-$30 per metric ton on June 12.

However, contrary to Motiva, the producer will also be increasing the price of its low-vis Group II 150 neutral cut by $10/t, according to sources. The price of the refiner's Group I SN150 cut would be left intact. No producer confirmation was forthcoming about these adjustments.

Within the heavy-vis segment, bright stock is especially tight, market sources said, as it is difficult to find a replacement for this cut in many downstream applications. Prices have climbed in recent weeks and continue to be exposed to upward pressure.

The Group I grades in general remain snug in China as a number of base oil facilities have recently completed turnarounds, or are undergoing maintenance.

One of these plants is Fushun Petrochemical, a subsidiary of PetroChina, which was expected to resume production of its 260,000 metric ton per year Group I base oils unit in Liaoning in June, but is likely to remain off-line until July due to poor market economics. The plant was shut down in the first quarter.

Additionally, Group I imports from Russia have dwindled as a producer has idled its base oil plant for a turnaround, which was expected to be completed in late May, but is now likely to be extended until late June.

China previously imported large volumes of Group I oils from the CPC-Shell plant in Taiwan, but the facility was permanently taken off-line last September.

Sources also said that regional supply of Group I oils had dwindled because Thai producer Thai Oil has been running its 300,000 t/y Group I unit in Sriracha at reduced capacity due to technical issues. It could not be ascertained whether the rates had improved this week.

Ongoing and upcoming turnarounds at Japanese facilities of JX Nippon Oil and Cosmo Oil were expected to result in tighter Group I supply as well, not only on the Japanese domestic market, but also in other countries that import product from these producers.

The tight conditions in Asia have also offered support to higher price indications in India. Local suppliers have increased June list prices of Group I grades by Indian rupees 0.90 per liter for SN 150, while SN 500 and bright stock experienced heftier hikes at rupees 2.70/l and rupees 2.00/l, respectively.

Given steady supply/demand fundamentals and firm crude oil prices earlier in the week, Asian base oil prices were assessed largely unchanged from the previous week.

On an ex-tank Singapore basis, Group I SN150 prices were mentioned at $660/t-$680/t, SN500 was heard at $760/t-$780/t, and bright stock was holding at $1,100/t-$1,120/t.

On an FOB Asia basis, Group I SN150 was gauged at $550/t-$580/t, and SN500 was steady at $660/t-$680/t FOB. Bright stock prices were hovering at $1,080/t-$1,100/t FOB.

Within the Group II category, prices for 150N were unchanged at $570/t-$610/t FOB Asia, and prices for 500N were holding at $710/t-$740/t FOB Asia.

In the Group III segment, 4 centiStoke and 6 cSt oils underwent few fluctuations and were assessed at $920/t-$940/t FOB Asia, while the 8 cSt grade was also steady at $730/t-$750/t FOB Asia.

There was bubbling activity in the shipping segment, with numerous inquiries involving cargoes moving from South Korea popping up during the week. A 2,100-ton cargo was expected to be shipped from Ulsan to Hong Kong between June 12-14. A 1,400-ton lot of two grades was being discussed for Onsan to Wakayama and Tsurumi, Japan, for June 11-13 loading. A 3,700-ton cargo was on the table for Onsan to Taicang and Zhenjiang, China, for June 8-12 lifting. A 2,000-ton parcel for Onsan to Tianjin, China, emerged for June 8-12 shipment.

A 3,000-ton parcel of two grades was likely to be shipped from Yeosu to Tianjin, China, on June 11-20. A total of 1,500 tons of three grades was being worked on for Yeosu to Taichung, Taiwan, for June 10-15 lifting. An 8,600-ton parcel of four grades was on the table for Yeosu to Mumbai, India, for prompt shipment. A 1,500-ton lot was being discussed from Yeosu to Xiaohudao, China, for June 15-25 lifting. A second 2,000-ton cargo was expected to be shipped from Yeosu to Guanzhou, China, between June 18-22.

Lastly, a 3,000-ton lot was being worked on from Cilacap or Jakarta, Indonesia, to Mid-China for second half of June shipment.

Upstream, July ICE Brent Singapore futures were trading at $62.94 per barrel in afternoon trading on June 8, compared to $65.11 per barrel on June 1.

Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com