The base oils market in Asia appears to be sputtering along, with some segments seeing more activity than others, and prices continuing to be exposed to upward pressure due to steeper crude oil and raw material prices.
Crude oil futures have been on a see-saw over the last couple of weeks, rising considerably one day and dropping sharply the next, with numbers climbing to new highs this week – both Brent and West Texas Intermediate prices reached their highest levels since December 2014.
Futures surged after President Trump warned Russia about a possible strike on its ally, Syria. Crude futures also reacted to a strike on top oil exporter Saudi Arabia by rebels in neighboring Yemen.
However, crude weakened early Thursday as Trump indicated that any strike on Syria may not be imminent.
The Organization of the Petroleum Exporting Countries said the global oil stocks surplus was declining due to healthy demand and the supply cuts implemented by its members, Russia, and several other non-OPEC producers, and this continued to offer support to oil prices.
On Thursday, April 12, Brent June futures were trading at $71.76 per barrel on the London-based ICE Futures Europe exchange, compared to $68.49 per barrel on April 5.
Meanwhile, suppliers in the base stock market expressed frustration at the fact that raw material values have strengthened, but it has been somewhat difficult to recoup these higher costs from the base oil side, as buyers were resisting the increased offer prices.
Another factor that was supporting base oil prices was a fairly tight supply and demand scenario, which has been the result of recent and ongoing plant turnarounds in Asia.
However, compared to previous years when a similarly busy turnaround schedule affected the region, there appear to be more options to source product, as base oil availability from the Middle East has increased, and there have also been a growing number of cargoes moving from the United States, particularly into India.
Buying interest from China has been less robust than expected for this time of the year, when consumers typically build inventories for the spring production cycle.
This has coincided with shrinking domestic production of base oils and reduced spot sales as one of the Sinopec plants in China was heard to be shut down for maintenance.
Sinopecs Gaoqiao plant was understood to be undergoing a turnaround this month. The plant has a nameplate capacity of 308,000 metric tons per year of Group I and 310,000 t/y of Group II base oils, and was expected to be restarted at the end of April.
Another Sinopec unit was expected to be taken off-line later in the year. Sinopec Jingmen was heard to have been scheduled for a one-month turnaround starting in early September. The unit can produce 203,000 t/y of Group I and 100,000 t/y of Group II grades.
Base oils spot prices were largely discussed within the assessed ranges in Asia, although upward price pressure continued to mount as crude oil and feedstock costs remained at steep levels. Some prices underwent upward revisions the previous week, but were unchanged this week.
On an ex-tank Singapore basis, Group I SN150 was heard at $750/t-$770/t, and the SN500 cut was steady at $850/t-$870/t. Bright stock was holding at $930/t-$950/t, all ex-tank Singapore.
Group II 150 neutral was assessed at $770/t-$790/t, and 500N at $910/t-$930/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was gauged at $690/t-$710/t, and the SN500 grade was at $780/t-$800/t. Bright stock was heard at $830/t-$860/t FOB Asia.
Group II 150N was hovering at $710/t-$730/t, and the 500N/600N at $810/t-$840/t, all FOB Asia.
In the Group III segment, the 4 centiStoke and 6 cSt grades were assessed at $830/t-$850/t, and the 8 cSt at $810/t-$830/t, FOB Asia.
In production news, ExxonMobil is moving forward with expansion plans at its Singapore refinery, with the producer completing the installation of a new reactor this week. The company plans to increase the production of Group II base oils by the second quarter of next year, but has not revealed the new capacity figures.
In April 2017, ExxonMobil also completed the expansion of its finished lubricants and grease facility in Jurong, Singapore, with production streaming in June last year. The complex is the only one in the region that produces Mobil 1, ExxonMobils flagship synthetic engine oil, and also houses the companys largest grease manufacturing site in Asia Pacific. The expanded operation is integrated with ExxonMobils adjacent Singapore refinery, which supplies base stock through pipelines.
In other market-related news, Chinas National Development and Reform Commission announced a price increase for gasoline and diesel as of April 13 in response to steeper international crude prices. This is the fourth increase this year, according to Xinhua News.
The retail prices of gasoline and diesel will rise by Chinese Yuan (CNY) 55 per metric ton and CNY 50/t, or approximately $8.75/t and $7.95/t, respectively.
Under the current pricing system, if global crude price fluctuations lead to price increases or declines of more than CNY50 per ton for domestic refined oil products, and remain so for 10 working days, gasoline and diesel prices are adjusted accordingly.
Fluctuations in fuel prices in China may affect the lubricants sector as they influence driving patterns in the country.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.