Patra SK - News
Jul 27, 2015
Asia Base Oil Price Report


Base oil prices were mixed in Asia this week, with indications for heavy-viscosity grades inching up and values for the lighter cuts drifting down.


The heavy-vis grades have not only been in tight supply in Asia, but also in Europe and the U.S., due to a combination of factors, such as reduced output at some facilities, recent Group I plant closures, and the utilization of shale oil for base oil production.


At the same time, ample supply of the light-vis grades in the Asian region was pushing suppliers to lower price indications to motivate buyers, sources said.


Lower crude oil prices also weighed on base oil market sentiment, as oil values have dropped by about 20 percent in the last six weeks. Slipping indications this week were attributed to a global supply glut and prospects that Iran will be increasing its exports, following a deal with world powers that would lift economic sanctions.


Fresh base oil price revisions from a major Southeast Asian refiner, which are generally seen as a bellwether of market conditions, were heard to be influencing current price ideas.


The refiner was heard to be planning to increase the list price of its Group I solvent neutral 600 by U.S. $20 per metric tons, with an effective date of Aug. 7, according to sources. 


At the same time, the producer was understood to be lowering the price of its Group II 150 neutral by $20/t as of July 28. There was no producer confirmation forthcoming about these adjustments.


Trading was generally muted in Asia because buyers have adopted a cautious attitude and are hoping for a clearer market picture to emerge in the next couple of weeks.


Consumers said they did not feel the need to jump at the first offer they received because supply was adequate and there did not seem to be any shortages of product, although they admitted that the heavy-vis cuts were snug, and fewer spot offers were on the table.


In China, demand was heard to have slowed down in July as compared to June levels, and participants expressed uncertainty whether fundamentals would shift in any significant way in August, as this is typically a slow month for base oil business.


Given plentiful availability of light-vis Group II oils, these products have lost their premium value compared to their Group I counterparts, and prices were being discussed at similar levels.


A couple of plants were expected to come on-stream in the next few months in China, possibly weighing down on current supply conditions.


A new Sinopec subsidiary, Nanjing Refinery, is expected to start trial runs in early August at Nanjing in Jiangsu province, Eastern China. The new Group II facility will produce 200,000 metric tons per year of mostly low-viscosity base oils, and was originally scheduled to start up in April, but the process was delayed due to technical issues and market economics. The plant will be running on feedstocks produced at neighboring Jinling Petrochemical Co.


Chinese producer Hainan Handi will also be resuming base oils production at its plant in Hainan province at the end of July, following a turnaround, sources said. The unit has an annual Group II capacity of 295,000 t/y.


Meanwhile, Sinopec Yanshan will be shutting down its base oil plant in Beijing in October because of a lack of supply of crude oil from the local supplier. The Beijing plant can produce 240,000 t/y of Group II base stocks.


As mentioned above, contrasting currents impacted base oil prices in Asia this week, which resulted in upward adjustments for some heavy-vis cuts, and downward movements for a few low-vis grades. 


On an ex-tank Singapore basis, Group I SN150 prices were slightly lower by $10/t at $650/t-$670/t, SN500 was heard at $780/t-$800/t, and bright stock was unchanged at $1,110/t-$1,130/t.


On an FOB Asia basis, Group I SN150 was assessed down by $10/t at $550/t-$580/t, SN500 was up by $10/t at $690/t-$710/t FOB, and bright stock was steady at $1,080/t-$1,100/t FOB.


Within the Group II category, prices for 150N were holding at $585/t-$620/t FOB Asia, and prices for 500N were up by $5/ton at $730/t-$755/t FOB Asia.


Within the Group III segment, the 4 centiStoke and 6 cSt oils were unchanged at $920/t-$940/t FOB Asia, while the 8 cSt grade was heard at $700/t-$720/t FOB Asia.


Base oils were conspicuously absent from the shipping scene this week, and rates were heard to be falling, with only two inquiries quoted ex-South Korea. One of the cargoes involved 1,000 metric tons of two base oil grades to be shipped from Yeosu to Ho Chi Minh, Vietnam, between Aug. 10-15, and the second parcel included 1,500 tons of two grades, moving from Yeosu to Tanjung Priok, Indonesia, around Aug. 25.


Upstream, September ICE Brent Singapore futures traded at $54.33 per barrel in afternoon trading on July 27, compared to $57.10 per barrel on July 20.



Source: Lubesandgreases

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