November 23, 2018
Volume 7 Issue 3
Asia Base Oil Price Report
Spot prices were slightly mixed in Asia, as base oil producers adjusted down offers for those grades that appeared more plentiful, while prices for a couple of cuts – which were less readily available – moved up to reflect benchmark levels, and a few oils were left unchanged from the previous week.
There continued to be generalized sentiment among base stock consumers that prices should be weaker, given the significant drop in crude oil and feedstock prices compared to about a month ago, but suppliers insisted that base oil values could not be adjusted overnight, and that tighter conditions of some of the cuts justified keeping prices intact.
Producers also reminded consumers that a large portion of the products that were available for shipment now had been manufactured while crude prices were still very high in early October.
A number of producers had also opted for reducing plant operating rates due to the relatively low base oil prices compared to gas oil values at that time, and they also hoped the strategy of trimming base oil output would bring the base oils market more into balance.
However, given the fall of gas oil prices, a few of these producers were reported to have increased base oil production rates and were running plants at close to full rates again.
In Taiwan, Formosa Petrochemical's API Group II base oil unit was heard to be running well, and the producer was expected to be able to ship increased volumes of cargoes to China this month, compared to October, when it was still building inventories after a two-month turnaround that was completed in September.
Asian buyers, including Chinese end-users, were keeping a low profile in terms of purchase volumes, as they preferred to use up existing inventories and finish the year with just enough material to run day-to-day operations.
In order to encourage consumers to place orders, suppliers lowered prices for a number of grades, with supply of the heavy-viscosity cuts heard to be more ample and requirements less healthy, thus resulting in lower indications for the API Group I solvent neutral 500 and the Group II 500N.
On the other hand, bright stock appeared to be maintaining its price position quite effectively as demand was said to be steady, with the additional factor that it is a difficult cut to replace with other base stocks.
Suppliers acknowledged that requirements from the automotive and industrial segments had slowed down, but admitted that this was no surprise, as activity tends to decline as the year-end holidays draw near.
Trading was subdued during the week, even in countries such as India, where discussions are typically quite lively mid-month, and this was partly attributed to the abundant availability of product, both locally, and through imports from the Middle East, the United States, South Korea and other Asian origins.
Spot price assessments were mixed in Asia this week, with some grades showing price erosion, some remaining stable, and bright stock and a Group III grade moving up because of steady demand and limited availability. The assessments were adjusted to reflect current discussions and published prices that are widely regarded as benchmarks.
Ex-tank Singapore prices for Group I solvent neutral 150 were unchanged at $760 per metric ton to $780/t, and the SN500 cut was assessed down $30/t from last week at $800/t-$820/t, as demand has declined and offers have been edging down. Bright stock was assessed slightly up by $10/t on reports of deals at steeper levels, between $880/t-$900/t, all ex-tank Singapore.
Group II 150 neutral was hovering at $780/t-$810/t and the 500N was adjusted down by $50/t to reflect current deals and discussions taking place at much lower levels near $810/t-$830/t, all ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was adjusted down by $10/t at $690/t-$710/t, while the SN500 slipped by $40/t to $740/t-$760/t. Bright stock was assessed slightly down by $10/t at $810/t-$830/t FOB Asia.
Group II 150N was revised down by $30/t to $700/t-$720/t FOB Asia, while the 500N and 600N were sharply down by $50/t at $730/t-$750/t FOB Asia.
In the Group III segment, the 4 centiStoke grade was holding at $860-$880/t, but the 6 cSt was assessed up by $30/t to $870/t-$890/t, and the 8 cSt was revised down by $30/t to $720/t-$750/t, FOB Asia, to portray benchmark indications and discussion levels.
Upstream, crude oil futures were lower at the start of the week as the U.S. Energy Information Administration reported a build of 4.9 million barrels in U.S. crude oil inventories for the week to November 16. This information pulled prices down on the back of rising production and concerns about slowing global economic growth.
However, on Wednesday, oil futures climbed to recoup part of the previous day’s nearly 7 percent loss, given expectations of potential production cuts to be discussed at a meeting of major oil producers on December 6.
On Thursday, Nov. 22, Brent January futures were trading at $62.60 per barrel on the London-based ICE Futures Europe exchange, down from $66.80/bbl on Nov. 15.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.