Base oil prices were receiving support from steep crude oil values and tight supply conditions, although the approach of the Lunar New Year holidays in mid-February placed a bit of a damper on buying interest.
Although crude oil futures have shown fluctuations over the course of the week, they climbed slightly on Thursday as OPECs compliance with its self-imposed production cuts appears to be strong, offsetting signs that U.S. production continues to grow, and has surpassed 10 million barrels per day for the first time since 1970.
Brent futures were trading below the $70 per barrel mark on Thursday, Feb. 1, and in the morning session of the London-based ICE Futures Europe exchange they were hovering at $69.13 per barrel, compared to $70.87 per barrel on Jan. 25.
Asian suppliers have steadily raised base stock offer levels over the last few weeks to offset the rise in raw material costs.
In Taiwan, local producer Formosa Petrochemical Corp. was heard to have lifted the domestic list price for February shipments of its API Group II base oils, following similar adjustments in January.
Formosa was understood to have increased its Group II 70N grade by New Taiwan dollars (NT$) 0.01 per liter, and its 150N cut by NT$ 0.21/liter. The producers heavy-viscosity 500N base oil was marked up by NT$0.09/liter.
Formosa gives priority to fulfilling domestic requirements, but also exports large volumes under contract to China. If the producer has enough material available for spot transactions, it will typically ship this product to China as well. Volumes delivered to China during February were anticipated to be lower than usual due to the February holidays.
Some Asian participants were somewhat surprised as several price increase announcements emerged in the U.S. during the week, only about three weeks after a round of hikes was implemented in early January.
Group II producers Chevron and Phillips 66 raised prices on the back of high crude oil values and snug supply/demand conditions, sources said, and it remained to be seen whether other suppliers would follow suit. A number of Group II cargoes makes their way from the U.S. Gulf Coast to different countries in Asia every month, including India, Singapore and China, and higher prices at origin could translate into steeper import values at these destinations.
Meanwhile, demand in Asia appeared to be losing some of its fizz. Several transactions were finalized in the first half of January as many participants preferred the cargoes to arrive ahead of the Lunar New Year celebrations, but other buyers decided to delay purchases in hopes prices would soften after the holidays.
The generally strong market fundamentals supported stable spot prices this week, following some adjustments the previous week. Most grades remained exposed to upward pressure due to the recent climb in crude oil and feedstock prices.
On an ex-tank Singapore basis, Group I SN150 and SN500 were heard at $720/t-$740/t, and $830/t-$850/t, respectively. Bright stock was steady at $910/t-$930/t, all ex-tank Singapore.
Group II 150 neutral was hovering at $730/t-$750/t, and 500N was unchanged at $890/t-$910/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was holding at $640/t-$660/t, and the SN500 grade at $750/t-$770/t, FOB Asia. Bright stock was steady at $810/t-$840/t.
Group II 150N was assessed at $650/t-$670/t, and the 500N/600N grades at $785/t-$825/t, all FOB Asia.
In the Group III segment, there were few changes reported, with the 4 centiStoke and 6 cSt grades holding at $790/t-$810/t, and the 8 cSt at $770/t-$790/t, FOB Asia.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.