Asia Base Oil Price Report（MAY 24, 2019）

A cloud of uncertainty seems to hang over the Asian base oils market, resulting in muted trade and largely unchanged price levels.

 

Participants appeared concerned about the ongoing trade conflict between China and the United States – the world’s two largest economies – and while not every supplier or buyer is directly involved in transactions with the two countries, a reduction of business opportunities was reverberating across the entire market, affecting business levels in the finished lubricants segment in particular.

 

The U.S. increased tariffs from 10 percent to 25 percent on $200 billion worth of Chinese products earlier this month, and Beijing responded with similar tariff hikes on $60 billion of U.S. exports, including chemicals, coal, vehicles, and medical equipment.

 

In China, base oil demand has declined on the back of the new tariffs imposed on several export products, while base oil imports from the United States were heard to have diminished significantly since last year. However, given the vast availability of base oils within Asia, the reduction in U.S. imports was not expected to cause any shortages.

 

Additionally, a couple new base oil plants have either started operations in China, or resumed production, increasing the domestic supply.

 

One of these facilities was PetroChina Dalian Petrochemical, which was heard to have restarted output of Group I low viscosity base oil, following a turnaround at its plant in Dalian. The plant has capacity to produce over 400,000 metric tons per year of Group I base stocks.

 

Another factor that was affecting Asian business was the volatility seen in the crude oil segment, with prices going up one day and down the next. Producers noted that it was difficult to forecast base oil price direction and reiterated that margins continued to be squeezed due to recent jumps in feedstock values, which they had been unable to fully recoup in earlier rounds of base stock increases.

 

Crude oil futures tumbled on Thursday, with the U.S. benchmark falling to a two-month low and Brent futures close to posting their biggest one-day loss of the year on concerns about the unresolved U.S.-China trade dispute, and news about rising U.S. oil inventories. Futures had strengthened earlier in the week on mounting tensions in the Middle East.

 

On Thursday, May 23, Brent July futures were trading at $67.75 per barrel on the London-based ICE Futures Europe exchange, down from $72.86/bbl on May 16.

 

Given the generally ample inventories at most base oil facilities, there were rumblings that producers were mulling the possibility of cutting back production, while streaming more feedstocks into transportation fuels, but no specific plants were mentioned in relation to the speculations.

 

Producers have been trying to place product by either looking for fresh opportunities in other regions, or by offering competitive pricing to gain or maintain market share, which seems to be particularly evident in the Group III segment.

 

In the Group II sector, there were reports that Taiwanese producer Formosa Petrochemicalhad awarded a sales tender for June shipment. The tender involved a total of 4,000 metric tons of Group II 150 neutral and 500N base oils and the price was formula-based, with sources indicating that it would result in a higher price level than that seen for transactions in May.

 

For the time being, spot prices in Asia remained steady, with participants waiting to see whether a clearer picture emerges as to crude oil and feedstock price trends.

 

Ex-tank Singapore Group I prices for the solvent neutral 150 grade were unchanged at $740-$760/t per metric ton, while the SN500 was stable at $790/t-$810/t. Bright stock was hovering at $900/t-$920/t, all ex-tank Singapore.

 

Group II 150 neutral was heard at $780/t-$800/t, while the 500N was unchanged at $790/t-$820/t, ex-tank Singapore.

 

On an FOB Asia basis, Group I SN150 was assessed at $650/t-$680/t, and the SN500 grade was at $640/t-$660/t. Bright stock was heard at $790/t-$810/t, FOB Asia.

 

Group II 150N was mentioned at $630/t-$650/t FOB Asia, while the 500N and 600N cuts were steady at $640/t-$660/t, FOB Asia.

 

In the Group III segment, the 4 centiStoke grade was hovering at $830-$870/t and the 6 cSt was at $840/t-$885/t. The 8 cSt grade was gauged at $730/t-$760/t, FOB Asia for fully-approved product.