Steady fundamentals continued to support stable to firm base oil prices in Asia, with some segments of the market showing tight availability as requirements remained healthy.
The upward price movements were evident in India, where supply of certain API Group I oils remained limited as import volumes from Iran had been reduced in recent weeks on the back of plant turnarounds there.
The Group I solvent neutral 500 grade inched up by about U.S. $10 per metric ton week on week to $800/t-$820/t CFR India, given that demand was said to be strong against snug supply. The SN150 was stable at around $680/t-$700/t CFR India. Bright stock has inched up in recent weeks, but was holding at around $880/t-$900/t CFR India this week.
In China, discussions for January Group I cargoes were ongoing, as some importers were hoping to secure parcels for arrival before the Lunar New Year holidays, which start on February 15, 2018. However, offers were considered too high and buyers were delaying decisions as long as possible, hoping to obtain year-end markdowns.
Suppliers were not very willing to trim offer levels because stocks were manageable, unlike in years past when sellers tried to lower inventories by offering attractive pricing. Both buyers and sellers typically strive to end the year with as little product as possible in their tanks to avoid tax implications.
At the same time, consumers were hesitant to commit to large cargoes in January, as many downstream manufacturing plants either shut down temporarily, or reduce operating rates at the end of the year, resulting in lower base oil requirements in ensuing weeks.
Despite this condition, supply in general was felt to be more limited in the region than during the same period in previous years, likely because of plant turnarounds and reduced output earlier in the year, against fairly steady requirements throughout.
In the Group II segment, Taiwanese producer Formosa Petrochemical was heard to be shipping its regular contractual volumes of Group II base oils to China this month, but will not offer any spot cargoes, as demand in the local market was expected to absorb the producers output. Formosa had been running its base oil plant at reduced rates in November due to a turnaround at an upstream feedstock unit at its refinery in Mai-Liao.
Formosa also increased its domestic list prices for its Group II 70 neutral, 150N and 500N grades in December on the back of tight supply and high production costs.
It was also heard that Formosa has already scheduled a routine turnaround at its Mai-Liao base oils plant in July 2018. The unit can produce 600,000 metric tons per year of Group II oils, according to LubesnGreases Global Guide to Base Oil Refining.
Participants also mentioned seeing tight Group II supply from South Korean producers, with one of them expected to bring back its facility on stream after a turnaround in November.
GS Caltexs base oils plant in Yeosu, South Korea, was heard to have been shut down for a turnaround that was anticipated to last one month. The plant was taken off-line in early November for adjustments to a next-generation catalyst that was installed last March, according to sources. The plant has capacity to produce 1,151,000 t/y of Group II base oils and 146,000 t/y of Group III cuts. There was no producer confirmation about the shutdown, or whether the plant had resumed production.
Base oil spot prices were either unchanged, or had inched up slightly this week, as steady conditions warranted a certain level of stability in the market. Discussions were ongoing, but a number of deals were anticipated to be concluded after the year-end holidays.
Group I SN150 was steady at $700/t-$720/t ex-tank Singapore, while the SN500 grade was unchanged at $810/t-$830/t. Bright stock was holding at $910/t-$930/t ex-tank.
Group II 150 neutral was heard at $710/t-$730/t, and 500N was steady at $880/t-$900/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 inched up $10/t to $620/t-$640/t, and the SN500 grade was holding at $730/t-$750/t, FOB Asia.
Bright stock was revised up by $10/t to $800/t-$830/t, to reflect published ranges widely regarded as benchmarks, although discussions were subdued. This cut continues to command strong buying interest in the industrial and marine segments.
Group II 150N was steady at $620/t-$640/t, and the 500N/600N grades were also unchanged at $770/t-$810/t, all FOB Asia.
In the Group III segment, 4 centiStoke and 6 cSt grades were hovering at $780/t-$800/t, while the 8 cSt was stable at $760/t-$780/t, FOB Asia.
Upstream, crude oil futures continued to place pressure on margins as prices crept up on Monday on news that the Forties Pipeline System in the North Sea – one of the worlds key oil conduits – was still shut down after a crack was discovered last week.
Oil values received further support as workers from one of Nigerias largest oil unions went on strike on Monday, fueling concerns that exports from Africas largest crude producer would be reduced.
On Monday, Dec. 18, Brent crude for January delivery on the London-based ICE Futures Europe exchange was trading at $63.45 per barrel, from $64.39/bbl on Dec. 11.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.