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March 15, 2019

Volume 6 Issue 11

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Asia Base Oil Price Report

Steep crude oil prices were exerting upward pressure on base oil price indications, but the supply glut was still an issue, with domestic prices climbing in one country, slipping in another, and spot offers heard to be rising from various supply points in Asia.

Despite the higher numbers bandied about, there was still a certain amount of downward pressure due to oversupply conditions in different segments of the market, limiting the upward movement of values, market sources noted.

Producers hoped that the nascent spring production cycle would result in increased demand, but so far, requirements have been slightly disappointing.

The long availability was not only evident in Asia, but in other regions as well, making it more difficult for suppliers to find alternative takers of product in other areas when regional markets became saturated. Nevertheless, it was heard that a few Northeast Asian API Group I cargoes had been sold into Europe.

Several cargoes were also understood to be making their way from the United States, Europe and the Middle East to India and China. This pertained mainly to Group II supplies, but there were some parcels of Group I and Group III from Europe and the Middle East included in the shipments. It appears that the outage at the Yanbu, Saudi Arabia, plant, has not had a significant impact on the market – at least not for the time being. This may change if the outage is extended.

Prices in India therefore remained competitive as there was plentiful availability of material, despite the fact that Iranian Group I imports have dried up due to the sanctions imposed on the country’s crude oil exports. In some cases, end-users have been able to utilize Group II instead of Group I molecules in certain applications, as prices were comparable.

Ample availability was also reported in China, where a couple of new plants were expected to come on stream soon, placing downward pressure on domestic price indications in the Shandong area.

Media reports mentioned the start-up of independent producer Shandong Weifang Shida Changcheng in February, with commercial base oils produced at the new 300,000 metric tons per year Group II plant becoming available this month.

Qingyuan Group, an independent Chinese refiner, has built a new unit in Shandong province designed to make base stocks that will be used as process oils and in lubricants. The company did not disclose the output capacity at the facility, but said that it will make rubber process oils, white oils and Group III base stocks. The plant was expected to start up in late 2018, but the process appears to have been delayed.

While prices were sliding in some areas in China, Taiwanese producer Formosa Petrochemical Co. adjusted up its domestic list prices for March shipments, driven by the recent climb in crude oil and feedstock values.

Formosa operates a 600,000 metric tons per year Group II plant in Mailiao, Taiwan, according to Lubes’n’Greases Global Guide to Base Oil Refining.

The producer’s 70 neutral grade was heard to have increased by New Taiwan Dollars (NT$) 0.58 per liter, while its 150N also edged up by NT$ 0.58/liter. Formosa’s 500N grade was lifted by NT$88/liter.

Indeed, Asian producers lamented that crude oil and feedstock costs had escalated in recent weeks, squeezing margins, and prompting higher offers for base oils in an effort to recoup some of the lost margins.

Crude oil futures steadied on Thursday after touching a four-month high as OPEC was expected to support production cuts at a gathering of the OPEC+ coalition taking place over the weekend in Baku, Azerbaijan.

However, gains were capped by reports that a meeting to resolve the U.S.-China trade dispute would likely be postponed beyond April.

Brent May futures were trading at $67.31 per barrel on the London-based ICE Futures Europe exchange on March 14, up from $66.33/bbl on March 7. By comparison, futures were trading slightly above $60/bbl on Jan. 17, 2019.

Spot base oil prices in Asia were stable-to-firm, with some assessments edging up to reflect current discussions.

Ex-tank Singapore prices for Group I solvent neutral 150 were stable at $740-$760/t per metric ton, while SN500 was holding at $750/t-$790/t. Bright stock was heard at $870/t-$890/t, all ex-tank Singapore.

Group II 150 neutral was assessed at $740/t-$780/t, while 500N was at $760/t-$800/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was up by $10/t at the low end of the range at $640/t-$670/t, while the SN500 moved up by $10/t to $610/t-$630/t. Bright stock was unchanged at $780/t-$800/t, FOB Asia.

Group II 150N was steady at $590/t-$610/t FOB Asia, while the 500N and 600N cuts inched up by $10/t to $610/t-$630/t, FOB Asia.

In the Group III segment, the 4 centiStoke grade was holding at $820-$860/t and the 6 cSt at $830/t-$880/t. The 8 cSt grade was assessed up by $10/t at $720/t-$750/t, FOB Asia for fully-approved product.

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.