Despite ongoing pressure from steep crude oil and production costs, spot prices in Asia did not move up significantly because ample availability was weighing on price ideas, although a few suppliers were able to achieve slightly improved price levels this week.
Producers were nervously monitoring crude prices, which have reached five-month highs and were expected to remain firm due to geopolitical tensions and production cuts by OPEC members.
Analysts noted that oil prices were supported by tightening global supplies as the maintenance season at refineries is coming to an end and there were signs of demand picking up. Prices rose even though United States crude stockpiles grew above estimates and production hit a new high.
Brent June futures vaulted over the $70/barrel mark on Thursday for the first time since November, but slipped slightly to around $69.92 per barrel on the London-based ICE Futures Europe exchange in afternoon trading. Numbers were up from $67.16/bbl on March 28. By comparison, futures were trading near $60/bbl on Jan. 17, 2019.
A few pockets of the base oil market saw a small uptick in pricing this week, with some of these adjustments carried out at the local level, and were not necessarily reflected in export numbers.
Producer Formosa Petrochemical introduced price hikes for domestic list transactions in Taiwan this month, driven by firm feedstock values and improved demand. Formosa operates a 600,000 metric tons per year API Group II plant in Mailiao, Taiwan, according to LubesnGreases Global Guide to Base Oil Refining.
Formosa’s Group II 70 neutral was lifted by New Taiwan Dollars (NT$) 0.60 per liter. The producer’s 150N cut was also increased by NT$60/liter, while its 500N edged up by NT$0.48/liter. The producer had also implemented price hikes in March given similarly bullish upstream conditions. It was also heard that Formosa had recently closed a sales tender for April delivery of Group II base oils as it sought to balance its inventory levels.
In China, producers were facing resistance to higher price offers given the plentiful availability of base oils, in particular Group II cuts as several Middle East cargoes have been booked, alongside more regional supply.
The start-up of new base stocks facilities in China were expected to exacerbate the current supply glut.
A new base oil plant in Shandong was heard to have started commercial sales of its Group II base oils. Qingyuan Group, an independent Chinese refiner, built a new unit designed to make base stocks that will be used as process oils and in finished lubricants. While the company did not disclose the output capacity at the facility, it said that it will make rubber process oils, white oils and also Group III base stocks in the future.
Spot base oil prices in Asia were assessed as stable to firm from a week ago, as some suppliers were able to push through moderate price hikes, while others maintained offer levels to capture more orders.
Ex-tank Singapore Group I prices for the solvent neutral 150 grade were stable at $750-$770/t per metric ton, while SN500 was assessed at $760/t-$800/t. Bright stock was steady at $880/t-$900/t, all ex-tank Singapore.
Group II 150 neutral was heard at $750/t-$790/t, while the 500N was mentioned at $770/t-$810/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was hovering at $640/t-$670/t, and the SN500 grade was unchanged at $620/t-$640/t. Bright stock was assessed at $780/t-$800/t, FOB Asia.
Group II 150N moved up by $10/t to $610/t-$630/t FOB Asia, while the 500N and 600N cuts were also up by $10/t at $620/t-$640/t, FOB Asia on higher bids and offers.
In the Group III segment, the 4 centiStoke grade was steady at $825-$865/t and the 6 cSt at $835/t-$885/t. The 8 cSt grade was assessed at $720/t-$750/t, FOB Asia for fully-approved product.
In related market news, chemical shipments going in and out of refineries in Texas, United States, have suffered delays because of the recent closure of the Houston Ship Channel. The waterway was closed for four days, following a tank fire and subsequent chemical spill at the Intercontinental Terminals Co. The fire was finally extinguished, but several tanks containing base oils and other products – including imported product from a South Korean supplier – were damaged, and some of the chemicals stored at the terminal also leaked into the Ship Channel. A number of the companies storing products at the terminal declared force majeure due to the damaged facilities and transportation issues.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.