SE Asia Group I base oils supply lengthens on refinery restarts

Author: Matthew Chong

2019/11/19

SINGAPORE (ICIS)--Supply of Group I base oil in southeast Asia is expected to lengthen as two refineries in the region restarted from their turnarounds in November.

In Indonesia, Pertamina restarted its 430,000 tonne/year Cilacap Group I unit in early November, after more than a month of shutdown from 25 September 2019.

In Thailand, IRPC also resumed production at its 340,000 tonne/year Rayong Group I unit early this month after it was shut in mid-October 2019, according to market sources.

Increased regional supply, however, will likely be offset to some extent by cuts in base oils production at a major Japanese refiner’s units by more than 20%, as it switches to produce more gasoil, which generates better margins, market sources said.

The Japanese refiner mainly sells Group I base oils to southeast Asia.

Group I and Group II base oils prices since July this year are mostly at levels last seen in the second half of 2017.

Prices of 0.05% gasoil have hovered at above $545/tonne FOB Singapore since late-August this year, in line with generally firm crude oil prices.

In the week ended 15 November, Group I SN150, SN500 and brightstock weekly prices were assessed flat at $540-580/tonne FOB (free on board) NE (northeast) Asia; $540-550/tonne FOB NE Asia; and at $695-705/tonne FOB NE Asia, respectively, according to ICIS data.

Weekly prices for Group II 150N were stable over the same period at $565-595/tonne FOB NE Asia, while those for 500N remained at $590-610/tonne FOB NE Asia, ICIS data showed.

Spot Group II discussions for South Korean and Taiwanese cargoes were in a short-term standstill as buyers were mostly non-committal in their purchases amid global economic uncertainties.

Overall base oils demand remained suppressed as buyers were not in a hurry to stock up on cargoes amid the seasonal year-end lull.

In India, buying interest for both Group I and II imports continued to be curbed due to relatively lower domestic prices as local refiners had reduced their prices amid poor downstream offtake.

An expected influx of US-origin Group II lots of more than 10,000 tonnes to India next month is expected to further weigh on market sentiment.

In the week ended 15 November, Group II 70N and 150N spot import prices in India were unchanged at $615-635/tonne and at $605-625/tonne respectively; while 500N prices were stable to soft at $610-635/tonne CFR (cost & freight) India, down by $5/tonne at the low end of the previous week’s price range, ICIS data showed.

Focus article by Matthew Chong

Photo: Cars in Jakarta. Base oils are used to produce finished lubes and greases for automobiles and other machinery. (By MAST IRHAM/EPA-EFE/Shutterstock)