Activity in some countries started to wind down ahead of the Lunar New Year celebrations, while in others, trading remained subdued as the market was riddled with uncertainties.
The Lunar New Year officially starts on Feb. 5, and many manufacturers in China, Taiwan and other Asian countries that observe the holiday shut down operations over a one-to-two week period because employees typically travel to their home towns for the celebrations.
This resulted in fairly muted conditions in the region this week, while a lack of clear price direction, insipid buying appetite and fluctuating feedstock prices also dampened business.
Producers had embraced expectations that demand would pick up ahead of the holiday, but requirements turned out not to be particularly strong in January. This was partly attributed to the fact that suppliers were in possession of plentiful inventories and buyers did not feel the need to jump at the first offer they received. At the same time, many end-users seemed to be happy to run operations hand-to-mouth and were not eager to acquire large cargoes.
On the bright side, suppliers hoped that many end-users would come back to the market to restock after the Lunar New Year, and that this would energize the market and offer support to spot pricing.
However, Chinese importers have been less actively seeking import cargoes in the last few months, and the total of imports was expected to be lower this year than in previous years as more production comes on stream locally. This does not apply to API Group III barrels as China was expected to receive quite a few shipments from the Middle East in February.
Another exception appears to be shipments from Taiwanese producer Formosa Petrochemical Co. Formosa exported a larger than usual amount of Group II cuts to China in January, but this was because some of its shipments had been delayed due to port congestion and tight vessel availability in December.
It was heard that supply of the Group I and II heavy-viscosity grades was particularly ample in Asia, although Group I bright stock was less available as demand was steady and there were fewer offers of this cut on the market. Several Group I parcels were said to have been offered by Southeast Asian producers – namely Thai refiners, as their plants were heard to have been running at full rates during December and January.
Market participants were also somewhat worried about the additional product slated to enter the market in Europe in the first quarter. ExxonMobils new Group II plant in Rotterdam, the Netherlands, was expected to come on stream in March as planned, a source familiar with the companys operations said.
As a result, less product will be shipped from the refiners plant in Singapore to meet European Group II demand in coming months. There were reports that the refiner had actively been seeking other outlets for its base oils over the last few months in preparation for the start-up.
Meanwhile, crude oil prices continued to move in a somewhat erratic pattern, going up significantly one day and tumbling the next, mostly influenced by geopolitical tensions.
Crude oil prices lost territory early in the week as it became evident that negotiations between China and the U.S. to resolve the trade dispute between the two nations were not progressing well. This fanned concerns that Chinas economy would continue to slow down and Chinese crude oil demand would decrease.
However, Brent crude and West Texas Intermediate moved up on Thursday following Wednesdays Weekly Petroleum Inventory Report by the U.S. Energy Information Administration that showed that Saudi Arabias oil exports to the U.S. had declined.
This appeared to be a result of the Saudis cutting production deeper than agreed to accelerate a hesitant rise in prices, OilPrice.com reported.
Additionally, the new round of sanctions from Washington that target Venezuelas state oil company, Petroleos de Venezuela S.A., also helped prices by fueling concerns about potential supply disruptions as the producer is one of the four largest suppliers of crude to U.S. Gulf Coast refiners.
On Jan. 31, Brent March futures were trading at $62.07 per barrel on the London-based ICE Futures Europe exchange, up from $61.13/bbl on Jan. 24. Brent had dipped below the $60 per barrel mark on Monday.
Spot base oil prices remained largely unchanged this week on account of thin business and a lack of strong fundamentals to sway prices in a particular direction. The Group II 500/600 neutral assessments were revised down to better reflect current price ideas.
Ex-tank Singapore prices for Group I solvent neutral 150 were assessed at $740-$760/t per metric ton, while SN500 was heard at $750/t-$790/t. Bright stock was hovering at $870/t-$890/t, all ex-tank Singapore.
Group II 150 neutral was holding at $750/t-$800/t and 500N was also steady at $760/t-$810/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was heard at $650/t-$690/t, while SN500 was near $620/t-$640/t. Bright stock was holding at $780/t-$800/t, FOB Asia.
Group II 150N was gauged at $590/t-$610/t FOB Asia, while the 500N and 600N cuts were revised down by $10/t at $620/t-$640/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 also steady at $710/t-$740/t, FOB Asia for fully-approved product.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.