Asia Base Oil Price Report(October 10,2017)

　　The upward price pressure noted of late has materialized in increases for a number of grades in Asia. Other cuts either remained stable, or registered small drops as the market readjusts to changing demand conditions.

　　Offers from some suppliers inched up during the week given that availability of certain grades was deemed limited on account of recent and ongoing production outages.

　　There were also many uncertainties affecting the global supply system, mostly linked to the fact that it was unclear how long the two largest base oil producers in the U.S. would maintain force majeure on base oil production.

　　Both Motiva and ExxonMobil declared force majeure and implemented allocation programs in the aftermath of Hurricane Harvey as the producers were forced to shut down operations due to flooding at their Baytown and Port Arthur plants, respectively.

　　While the outages affect mainly the API Group II segment, suppliers of Group I and III oils said that buyers were trying to secure product in other segments given rising prices and a lack of immediate availability.

　　The U.S. typically exports significant Group II volumes as well as naphthenic oils to Asia, and the tightening of domestic supplies was straining availability for spot export transactions.

　　Asian base oil demand during the winter months also tends to shift, with the heavy-viscosity grades seeing a decline in requirements as the lighter grades are favored by blenders for their cold-weather formulations.

　　As a result, there have been some upward price movements for the light grades, whereas the heavier grades have either remained unchanged from previous weeks, or seen slight downward adjustments.

　　Within the Group I segment, bright stock had been enjoying fairly steady demand and pricing, but requirements for this base stock have weakened and prices remained flat.

　　Likewise, the Group II 500 neutral grade had been hovering at fairly steady levels for the last couple of weeks. However, while suppliers were hoping to push offers above the U.S. $800 per metric ton FOB Asia mark, resistance from buyers drove numbers to levels closer to $750/t FOB Asia.

　　Conversely, the Group II 150N underwent little fluctuation as demand was consistent with previous weeks and availability was deemed balanced against requirements, with offers hovering close to $600/t FOB Asia.

　　The overall pricing situation may change slightly as activity bounces back in markets such as China and Taiwan, following national holidays when many participants were away from the trading scene, but no sharp fluctuations were expected.

　　The heavy-vis grades were not likely to see much upside in terms of demand, as it was anticipated to remain sluggish and current inventories and imports deemed sufficient to cover immediate product needs.

　　In Taiwan, the local producer Formosa Petrochemicals was heard to have adjusted its domestic list prices for October shipments of its Group II oils.

　　Formosa was understood to have increased the price of its 70N cut by New Taiwan Dollars 55 cents per liter and its 150N by NT 35 cents/l from September’s numbers. Both cuts were said to be attracting steady buying interest.

　　On the other hand, the producer lowered the price of its 500N base oil by NT 9 cents/l given declining demand.

　　Similarly, spot prices in Asia were mixed, given the conditions described above, with discussions picking up this week as participants hoped to conclude October shipments.

　　On an ex-tank Singapore basis, Group I SN150 was assessed between U.S. $670/t and $690/t. SN500 and bright stock were steady at $830/t-$850/t and $920/t-$940/t, respectively.

　　Group II 150 neutral was unchanged at $680/t-$700/t, and 500N was slightly lower by $10/t at $880/t-$900/t ex-tank Singapore.

　　On an FOB Asia basis, Group I SN150 was assessed at $560/t-$580/t. The SN500 cut was down by $10/t at $700/t-$720/t FOB Asia and bright stock was also adjusted down by $10/t at the low end of the range to $740/t-$770/t FOB Asia.

　　As mentioned above, Group II 150N remained steady at $580-600/t, but the 500N/600N grades were revised down by $30/t-$40/t to $760/t-$790/t, all FOB Asia.

　　In the Group III segment, prices were generally steady, with the 4 centiStoke and the 6 cSt grades assessed at $750/t-$770/t and the 8 cSt cut at $730/t-$750/t FOB Asia.

　　Upstream, crude oil futures were mixed on Monday, with traders still assessing the impact of Hurricane Nate on U.S. Gulf Coast refineries.  There were also hopes that OPEC would implement further cuts in oil production.

　　The ICE Brent Crude Futures Singapore Marker for December was hovering at $55.63 per barrel at the close of Asia’s session on October 9, from $56.60/bbl on October 2.