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Copyright © 2016 Argus Media group

Argus Base Oils

Issue 16-07 | Friday 19 February 2016

Base oil market prices, news and analysis

PRICES AT A GLANCE

Asia-Pacifc $/t

Low High ±

Group I

SN 150 ex-tank Singapore 445.00 485.00 -5.00

SN 500 ex-tank Singapore 500.00 540.00 -5.00

Bright stock ex-tank Singapore 920.00 960.00 -10.00

SN 150 fob Asia 365.00 405.00 +0.00

SN 500 fob Asia 405.00 445.00 +0.00

Bright stock fob Asia 840.00 880.00 -10.00

Group II

N150 ex-tank Singapore 435.00 475.00 -5.00


N150 fob Asia 355.00 395.00 +0.00

N500 fob Asia 475.00 520.00 +0.00

India and UAE $/t

Low High ±

Group I

SN 150 (LVI) cfr India 400.00 450.00 +0.00

SN 500 (LVI) cfr India 420.00 455.00 +0.00

Bright stock cfr India 830.00 870.00 -5.00

SN 150 (LVI) cfr UAE 390.00 430.00 +0.00

SN 500 (LVI) cfr UAE 400.00 440.00 +0.00

Group II

N150 cfr India 400.00 440.00 +0.00

N500 cfr India 505.00 545.00 +0.00

Northeast Asia $/t

Low High ±

Group I

SN 150 cfr 410.00 445.00 +0.00

SN 500 cfr 470.00 510.00 +0.00

Bright stock cfr 925.00 965.00 -5.00

Group II

N150 cfr 400.00 440.00 +0.00

N500 cfr 540.00 580.00 +5.00

Europe $/t

Low High ±

Group I

SN 150 fob domestic NWE 530.00 575.00 -10.00


Bright stock fob domestic NWE 895.00 930.00 -5.00

SN 150 fob European export 445.00 480.00 -5.00


Bright stock fob European export 815.00 855.00 -25.00Group II

N150 fca ARA 710.00 750.00 +0.00

N600 fca ARA 825.00 855.00 +0.00

Group III

4cst fca NWE 834.00 867.00 -21.50

6cst fca NWE 850.00 889.00 -22.50

8cst fca NWE 834.00 873.00 -21.50

Russia and FSU $/t

Low High ±

Group I

SN 150 fob Baltic Sea 380.00 420.00 +0.00

SN 500 fob Baltic Sea 460.00 500.00 +0.00

SN 150 fob Black Sea 400.00 440.00 +0.00

SN 500 fob Black Sea 420.00 460.00 +0.00

US $/t

Low High ±

Group I

SN 150 fob 376.00 424.00 -6.00

SN 500 fob 593.00 641.00 -9.00

Bright stock fob 803.00 850.00 -29.00

Group II

N100 fob 384.00 434.00 -6.50

N220 fob 375.00 424.00 -12.00

N600 fob 660.00 708.00 -30.00

Group III (domestic)

4cst 810.00 860.00 +0.00

6cst 816.00 866.00 +0.00

8cst 841.00 891.00 +0.00

Naphthenic base oils

Pale oil 60 fob 421.00 471.00 -9.00

Pale oil 100 fob 413.00 463.00 -9.00

Pale oil 500 fob 431.00 477.00 -6.00

Pale oil 2000 fob 459.00 505.00 +0.00

Crude oil and gasoil futures

±

Ice Brent front month ($/bl) 34.28 +4.22

Ice gasoil front month ($/t) 321.25 +35.75

OVERVIEW

CONTENTS

Global trade ows, freight rates, feedstock fundamentals 2-3

Markets 4-22

News and analysis 23-25

Maintenance and market fundamentals 26-28

Global base oil prices were lower. US prices have continued

to ease as more producers cut their prices. European prices

were lower on the back of plentiful supplies. But Asia-Pacic

prices held steady with buyers well-supplied by contracted

volumes. Northeast Asia held rm with a seasonal pick-up in

buying interest but buyers preferred smaller purchases, cap-

ping any upside to prices.


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Issue 16-07 | Friday 19 February 2016Argus Base Oils

Page 2 of 29

Arbitrage opportunities - Group I $/t

Second centre less SN 150 SN 500frst centre This

weekPriorweek

Thisweek

Priorweek

Europe expor t-Singapore +2.50 +2.50 -35.00 -40.00

Baltic Sea-Singapore +65.00 +70.00 +40.00 +45.00

Europe export-UAE (LVI) -52.50 -57.50 -135.00 -145.00

Asia-US domestic +37.50 +40.50 +244.00 +259.00

Europe export-US domestic -40.00 -42.00 +114.00 +119.00

Black Sea-India (LVI) +5.00 +5.00 -2.50 -2.50

Asia-India (LVI) +40.00 +40.00 +12.50 +12.50

Baltic Sea-US domestic +22.50 +25.50 +189.00 +204.00

Baltic Sea-domestic NWE +152.50 +162.50 +157.50 +182.50

US expor t-Singapore +65.00 +64.00 -97.00 -101.00

Arbitrage opportunities - Group II $/t

Second centre less N100/N150 N500/N600frst centre This

weekPriorweek

Thisweek

Priorweek

Asia-ARA +355.00 +355.00 +342.50 +342.50

Asia-US domestic +50.00 +54.50 +213.50 +237.50

Asia-India +45.00 +45.00 +27.50 +27.50

US export-ARA +321.00 +314.50 +156.00 +126.00

US export-India +11.00 +4.50 -159.00 -189.00

US expor t-Singapore +46.00 +44.50 -119.00 -144.00

Freight rates (US) * $/t

Route 1,0 00t 3,00 0t 5,0 00t 10,0 00t

US Gulf coast-Rotterdam 80-82 69-71 59-61 53.00

US Gulf coast-Brazil 91-94 73-76 64-66 53-55

US Gulf coast-Far East 110-115 73.00 65-67 60-62

US Gulf coast-India 130.00 90-95 75.00 62-67

* rates for December 2015, provided by SPI Marine (www.spimarineusa.com)

Freight rates (Asia-Pacifc) * $/t

Route 3,000t 5,000t

Singapore-WC India 48.00 44.50

Singapore-Indonesia 28.50 25.50

Singapore-Thailand 30.00 27.00

Singapore-central China 44.50 38.50

Singapore-Japan 54.50 48.50

S.Korea-WC India 72.00 64.00

S.Korea-Singapore 32.00 29.00

S.Korea-Japan 24.50 18.50

S.Korea-central China 26.50 23.50

S.Korea-Taiwan 27.00 26.00

Japan-central China 32.00 28.00

S.Korea-US Gulf coast 84.00 76.00

S.Korea-Europe 123.00 108.00

Mideast Gulf-WC India 40.50 35.50

Mideast Gulf-central China 64.00 59.00

* rates based on one port loading/one port discharge

* rates provided at market close on 18 February by SPI Marine

(www.spimarineasia.com)

fob Asia

SN 150 385.00

SN 500 425.00

N150 375.00

N500 497.50

fob US export

SN 150 400.00

SN 500 617.00

N100 409.00

N600 684.00

cfr India

SN 150 (LVI) 425.00

SN 500 (LVI) 437.50

N150 420.00

N500 525.00

fob European export

SN 150 462.50

SN 500 555.00

N150 fca ARA 730.00

N600 fca ARA 840.00

cfr UAE (LVI)

SN 150 410.00SN 500 420.00

fob Baltic Sea

SN 150 400.00

SN 500 480.00

fob Black Sea

SN 150 420.00

SN 500 440.00

ARGUS MARKET MAP

cfr NE Asia

SN 150 427.50

SN 500 490.00

N150 420.00

N500 560.00


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Page 3 of 29

Global base oil prices fell relative to competing and feed-

stock prices. Base oil margins in Europe began to ease from

still-high levels on the back of the continuing slide in out-right prices in that market.

Domestic European SN 150 base oil price premiums to

30-day average Ice gasoil futures have fallen to $254/t, down

from a more-than three-year high above $280/t at the end of

last month. The premium was higher compared with $137/t

at the same time last year.

The SN 150 premium to four-week-average vacuum gasoil

(VGO) prices has eased to $345/t from a 12-month high of

$367/t at end-January.

US domestic N100 base oil price premiums to 30-day av-

erage US heating oil futures have slipped to $0.35/USG. The

premium compares with $0.26/USG at the same time a year

earlier. The N100 premium to VGO slipped to $0.58/USG.

In Asia-Pacic, the premium of ex-tank Singapore SN 150

to Ice gasoil has eased to $167/t, against year-earlier levels

of $158/t. The SN 150 premium to four-week-average high-

sulphur fuel oil prices fell to $314/t.

European base oil values have been unusually rm rela-

tive to diesel and crude prices, at their highest levels in

almost four years. Those high values incentivised producers

to maintain or increase output at a time when the arbitrages

to most overseas outlets were shut. Even with outright

prices now falling at an increasingly fast pace, those marginsremain strong.

Group III base oil prices have also held unusually rm

relative to diesel and crude prices. Their value had held

relatively steady in the two years to third-quarter 2014,

tracking the relative rise and fall in crude oil prices during

that period. Their value then surged from second-half 2014.

Unlike the preceding years, Group III prices broke from their

link with crude when crude prices began to fall sharply from

July 2014. Group III prices fell at a much slower pace during

that period.

Group III values relative to crude subsequently surged to

around $430/t in the rst quarter of 2015 in Asia, up from

less than $200/t at the same time a year earlier. Those

values are still around $425/t in the rst quarter of this year.

Margins also rose in Europe and US.

With feedstock costs falling and prices relatively steady,

prot margins for Group III producers have risen. South Ko-

rean producer S-Oil’s operating prot margin from its lubes

and base oils operations rose to 23.6pc last year, up from

13.1pc in the previous year and 8.8pc in 2013. SK Lubricants’

fourth-quarter prot margin rose to 16.7pc, the highest in

more than three years.

FEEDSTOCK FUNDAMENTALS

Demand for Group III base oils is rising. But the strong

rise in Group III values also coincided with the start-up of a

new Group III plant in Europe in second-half 2014, adding toglobal supply.

The price strength has spurred some Group II production

with the capacity to also produce Group III to do just that,

in order to take advantage of the more-than $280/t price

spread between Group II and Group III base oils in markets

such as Asia-Pacic last year. The price spread was less than

$90/t in 2014.

The price strength has also incentivised blenders priori-

tising viscosity over viscosity-index to seek Group II supplies

instead of Group III.

One of the factors supporting that price strength is the

relatively smaller number of Group III producers compared

with Group I and Group II producers. This has facilitated the

ability to link prices with crude prices when crude was ris-

ing, and then delink prices when crude fell.

But the result is the same as the current European Group

I base oil market – a growing incentive among producers to

maximise production, and to bring on line more production

capacity in an already oversupplied market.

Such an increase in capacity in the Mideast Gulf has been

delayed repeatedly over the past year. But that round of

delays is expected to end soon, with start-up expected in

the next few weeks.

Complimentary Argus Forum:

Global Base Oil Outlook in 2016

17 February 2016 | 3.30pm | Sofitel St James, London, UK

At a time o major structural changes and limitedshort-term visibility in the base oil market, the fifhArgus Base Oils Forum will present a global base oiloutlook or 2016.

For more information or to register:Email: [email protected] :+44 (0) 20 7780 4200

illuminating the markets


4/29



Page 4 of 29

Group I $/t

Low High ±

SN 150 ex-tank Singapore 445.00 485.00 -5.00SN 500 ex-tank Singapore 500.00 540.00 -5.00

Bright stock ex-tank Singapore 920.00 960.00 -10.00

SN 150 fob Asia 365.00 405.00 +0.00

SN 500 fob Asia 405.00 445.00 +0.00

Bright stock fob Asia 840.00 880.00 -10.00

ASIA-PACIFIC

Group II $/t

Low High ±



N150 fob Asia 355.00 395.00 +0.00

N500 fob Asia 475.00 520.00 +0.00

Oil products $/bl

±

Singapore 0.05% gasoil 40.70 +5.60

Gasoil premium to Dubai crude 9.92 +0.90

SN 500 premium to gasoil 19.20 -5.60

Crude $/bl

±

Dubai crude front month 30.58 +4.88

SN 500 premium to Dubai crude 29.32 -4.88

Asia SN 500 forward prices $/t

Low High ±

Mar 2016 415.00 435.00 +0.00

Apr 2016 421.45 441.45 -0.25

May 2016 427.35 447.35 -0.30

2Q 2016 427.25 447.25 -0.30

3Q 2016 445.35 465.35 -0.45

The price shows the implied forward-curve base oil price required to maintain

its existing prot margin relative to Ice gasoil futures.

Refer to www.argusmedia.com for methodology

Asia SN 500 forward premium to gasoil $/t

Midpoint ±

Mar 2016 124.30 -6.45

Apr 2016 117.85 -6.20

May 2016 112.00 -6.10

2Q 2016 112.05 -6.15

3Q 2016 94.00 -5.95

The premium shows the implied forward-curve protability of fob Asia SN 500

relative to Ice gasoil futures. Refer to www.argusmedia.com for methodology

Ex-tank Singapore reference prices $/t

Group I Group II

SN 150 SN 600 Bright stock N150 N500

545.00 570.00 985.00 525.00 625.00

Asia-Pacic base oil prices have held steady this week. Some

producers still have February-loading supplies available. Oth-

ers have yet to offer March spot shipments. But demand wasmixed.

Demand from the region remained weak following last

week’s lunar new year holidays, with most buyers already

well supplied by contracted volumes and existing invento-

ries. But Chinese demand remained rmer.

Some regional suppliers are in talks to sell March-loading

shipments to China, limiting their availability of spot supplies

for southeast Asia.

Other producers still had February-loading shipments

available. But they maintained their price levels, despite

weak interest, in anticipation of rmer prices buoyed by

seasonal demand. Steadier crude prices have also bolstered

condence that they were close to bottoming out. The

prolonged slide in crude prices has been a key factor spur-

ring buyers to keep low stocks to limit their exposure to a

further price drop.

Finished lubricant demand in the region is showing signs

of picking up. But most buyers remained cautious and pre-

ferred to hold back from bulk purchases.

Group I supplies limited

A Thai producer has sold out of its February supplies. It is

unlikely to have spot cargoes in March. It is running at maxi-mum capacity.

Another Thai producer has also sold out most of its Feb-

ruary cargoes. But it still has some volumes of heavy-grade

base oils available.

A northeast Asian producer had some volumes of bright

stock available for loading in March. It was targeting prices

at similar levels to Thai product sold recently. It received

enquiries mostly from buyers in southeast Asia. The produc-

er has started building stocks ahead of a shutdown at one of

its base oils plant from mid-June to mid-August.

But other northeast Asian supplies loading in March were

possibly offered at even lower levels. Heavy-grade prices

were at below $450/t cfr southeast Asia. Bright stock was

offered at below $900/t cfr.

A southeast Asian producer sold exibag volumes of

heavy grade base oils to the region at below $470/t fob. But

most of its bulk offers were deemed too high. The producer

typically pushes surplus supplies to its domestic market, so

any supply overhang is unlikely to have a signicant impact

on prices.

Group III $/t

Low High ±

4cst ex-tank Singapore 780.00 845.00 -5.00

6cst ex-tank Singapore 780.00 835.00 -5.00


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Page 5 of 29

ASIA-PACIFIC

Vessel enquiries: Asia-Pacifc t

Loading port Next port B/L Date Volume

Singapore Calcutta Ely Mar 4,475Melaka Antwerp 10-17 Mar 3,500

Singapore India 5-10 Mar 3,100

Cilacap Nantong 10-15 Mar 2,000

Korea WCI 5-10 Mar 1,500

Onsan Bangkok 1-5 Mar 1,100

Onsan Japan 26-29 Feb 2,000

Onsan Yingkou 22-26 Feb 3,300

Onsan Taiwan 16 Feb 6,000

Singapore Jakarta 21-23 Feb 30,000-32,000

Source: shipping agents, brokers

Demand for Group II supplies rises

Most Group II producers were in discussions over March-

loading shipments with a few producers sold out of product,mainly because of an increase in demand from China A

northeast Asian producer has no spot cargoes in March, with

most such supplies lined up to head to China. Some Chinese

term buyers have requested more heavy-grade supplies in

February and March, reecting the structural tightness of

the product in the country.

A South Korean producer is prioritising sales to China and

southeast Asia on the back of more favourable prices. Its

volume of spot supplies in March is similar to the previous

month, but it has more light than heavy grades. The pro-

ducer is targeting slightly higher prices for its March cargoes

because of stronger demand from China.

Another South Korean producer is in talks over enquiries

for Group II light and heavy grades. It received fewer enqui-

ries for Group III supplies and supplies in exibags.

Malaysian Group II+ heavy-grade base oils were sold at

below $510/t fob. Group III supplies were available at below

$660/t fob. But the price level was deemed too high.

Suppliers hold steady ex-tank offers

Distributors maintained their ex-tank price offers amid weak

trading activity. Offers of Group I heavy grades held at

$580/t and offers of bright stock at $980/t ex-tank Singa-pore.

Group II offers held steady. Light grades were offered

at $495-500/t ex-tank, with heavy grades at $580/t ex-tank

Singapore.

Group III offers held rm, with 3cst offered at $935/t and

4cst and 6cst offered at $990/t ex-tank Singapore.

Fob Asia Group I vs Group II $/t

-50

-25

0

25

50

75

100

125

6 Feb 15 5 Jun 15 2 Oct 15 12 Feb 16

N150 vs SN 150 N500 vs SN 500

Asia SN 500 premium to Ice gasoil $/t

0

50

100

150

200

6 Feb 15 5 Jun 15 2 Oct 15 12 Feb 16

Ice gasoil front month = 0


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Page 6 of 29

NORTHEAST ASIA

Group I $/t

Low High ±

SN 150 cfr 410.00 445.00 +0.00SN 500 cfr 470.00 510.00 +0.00

Bright stock cfr 925.00 965.00 -5.00

Group II $/t

Low High ±

N150 cfr 400.00 440.00 +0.00

N500 cfr 540.00 580.00 +5.00

Group III $/t

Low High ±

4cst cfr 690.00 730.00 +0.00

6cst cfr 690.00 730.00 +0.00

8cst cfr 545.00 585.00 +0.00

China domestic prices

Yn/t $/t

Low High ± Low High ±

Group I, SN 150

Northeast

Daqing 5,800.00 5,900.00 +0.00 890.00 905.00 +7.00

Dalian 5,650.00 5,850.00 +0.00 867.00 898.00 +7.50

North

Yanshan 5,900.00 6,000.00 +0.00 905.00 921.00 +7.50

South

Maoming 5,650.00 5,850.00 +0.00 867.00 898.00 +7.50

Group I, SN 400

Northeast

Fushun 6,100.00 6,200.00 +0.00 936.00 951.00 +8.00

Dalian 6,050.00 6,150.00 +0.00 928.00 944.00 +7.50

South

Maoming 5,600.00 5,800.00 +0.00 859.00 890.00 +7.00

Group II, N150

East

Gaoqiao 5,600.00 5,800.00 +0.00 859.00 890.00 +7.00

South

Huizhou 5,750.00 5,950.00 +0.00 882.00 913.00 +7.50

China import price calculator *

Yn/t $/t


Group I (imported prices)

SN 150 5,316.00 5,599.00 -29.00 816.00 859.00 +2.50

SN 500 5,801.00 6,124.00 -33.50 890.00 940.00 +2.50

Bright s tock 9,478.00 9,801.00 -105.50 1,454.00 1,504.00 -4.00

Group II (imported prices)

N150 5,235.00 5,558.00 -28.50 803.00 853.00 +2.50

N500 6,367.00 6,690.00 +2.50 977.00 1,027.00 +9.00

* inc. 6% customs duty, 17% VAT and 1,711.50 Yuan/t consumption tax.

Northeast Asian base oil prices are mostly steady. Buying

interest has improved ahead of the peak oil-change season.

But many buyers continued to enquire about supplies orcommit to small volumes only.

The pick-up in enquiries followed the end of the week-

long public holiday in China last week to celebrate the lunar

new year.

Their lack of urgency to secure larger volumes reected

expectations of sufcient availability as and when they

required such volumes. The size of a possible rise in prices

over the coming weeks in response to rmer demand was

also expected to be limited. Some buyers were more com-

fortable paying such prices than holding larger stocks.

There had been some expectations that China would

increase its consumption tax. The move had been expected

to boost base oils demand before the imposition of such an

increase. It would also increase domestic base oil prices in

China as sellers included the additional cost in their prices.

But no such move has been made. Crude prices holding

in a low range have also removed another potential spur to

support a pick-up in prices.

Maintenance in the region this year is also expected to

be light, especially compared with this time last year. But

one major regional producer of Group II base oils to China

was possibly already curbing its export volumes as it builds

stocks ahead of a planned shutdown of its plant in the sec-ond quarter of the year.

Group I base oil prices mostly held steady in China’s

domestic market, although bright stock prices faced more

downwards pressure.

Offers of SN 150 and SN 400 originating from PetroChina’s

Dalian renery held at 5,650 yuan/t ($867/t) and Yn6,050/t

ex-renery respectively. Offers of SN 650 were at Yn6,250/t.

The producer has continued to maintain operating rates at

unusually low levels, extending such a move that it began at

the start of November.

Another major producer had planned to cut its prices

by some Yn200/t for its spot supplies this month. But it was

considering reducing the size of the price cut in response to

steadier market prices and demand.

Its Group I unit at its Jingmen plant resumed normal

operations earlier this month. It plans to restart its Group II

unit at the plant at the start of March. One of the units had

been taken off line last August and the other last December.

Bright stock supplies rise

Availability of imported volumes of Group I base oils has

improved. The rising volumes of bright stock and SN 500

followed a steady wave of imports from southeast Asia in


7/29


8/29



Page 8 of 29

Group I $/t

Low High ±

SN 150 cfr 440.00 485.00 +0.00

SN 500 cfr 480.00 525.00 +0.00

SN 150 (LVI) cfr 400.00 450.00 +0.00

SN 500 (LVI) cfr 420.00 455.00 +0.00

Bright stock cfr 830.00 870.00 -5.00

Group II $/t

Low High ±

N150 cfr 400.00 440.00 +0.00

N500 cfr 505.00 545.00 +0.00

Group III $/t

Low High ±

4cst cfr 575.00 605.00 -5.00

6cst cfr 585.00 615.00 -5.00

8cst cfr 535.00 565.00 -5.00

INDIA

Domestic refnery prices

Rs/l * ± $/t ±

Group I

IOC prices, Chennai

SN 70 54.85 +0.00 982.00 -2.00

SN 150 50.95 +0.00 857.00 -2.00

SN 500 51.45 +0.00 851.00 -2.00

Bright stock 86.50 +0.00 1,402.00 -2.00

IOC prices, Mumbai

SN 70 52.85 +0.00 946.00 -2.00

SN 150 48.95 +0.00 823.00 -2.00

SN 500 46.95 +0.00 777.00 -1.00

Bright stock 84.95 +0.00 1,376.00 -3.00

Group II

IOC prices, Chennai

N70 55.01 +0.00 960.00 -2.00

N150 51.75 +0.00 890.00 -2.00

N500 52.21 +0.00 886.00 -2.00

IOC prices, Mumbai

N70 57.15 +0.00 997.00 -2.00

N150 49.75 +0.00 855.00 -2.00

N500 48.15 +0.00 817.00 -2.00

* prices in Rs/l effective from 01 Feb

Indian base oil prices have held mostly steady, with buyers

and sellers in little rush to start negotiations for March sup-

plies.Some producers in Asia-Pacic are targeting higher spot

prices for March because of more rangebound crude prices,

steadier term prices and tighter availability. Firmer demand

and higher prices in China have also prompted producers to

prioritise this market instead.

There was also a lack of light-grade shipments from Spain

or the US, or of Group I volumes from Europe.

But buyers remained unconcerned, having already built

sufcient stocks to cover requirements for at least the next

month.

Finished lube demand typically peaks in the rst few

months of the calendar year. Lube blenders also seek to

maximise sales in the month of March before the end of

India’s scal year on 31 March. But the base oils feedstock

used to produce these volumes is typically bought several

months earlier by blenders relying on imports and then

processed into lubricants in February, before being sold in

March. The typical rise in lube demand in March subsequent-

ly has a smaller impact on base oil import requirements.

Buyers have also been covering requirements with

supplies from domestic producers, which have been offer-

ing volumes at unusually low prices that have dampened

interested in imported cargoes. But availability from oneproducer thinned sharply this month. Its supply tightness is

expected to ease in March.

But the producers could have less availability next month

as their downstream blending units consume more volumes

to make more lubricants before the end of the scal year.

While availability of light-grade spot volumes has tight-

ened, a large cargo of such supplies of South Korean origin is

expected to reach India imminently. There has also been a

pick-up in volumes from Finland this month.

Indian base oils vs Europe $/t

-50

0

50

100

150

27 Feb 15 26 Jun 15 23 Oct 15 19 Feb 16

SN 150 Bright stock


9/29



Page 9 of 29

INDIA

Vessel enquiries: India t


Singapore Calcutta Ely March 4,475Chennai BIK 1-5 Mar 3,000-5,000

AG WCI 5-10 Mar 3,000-5,000

Korea WCI 5-10 Mar 1,500

Singapore India 5-10 Mar 3,100


Supplies from Iran continue to cover many buyers’

heavy-grade requirements. Price offers for these supplies

held steady, although the viscosity index of some of thesesupplies was lower than usual.

March discussions remain muted

South Korea’s producers have barely started negotiations

with Indian buyers for March-loading volumes.

Their lack of urgency to sell partly reected rm de-

mand and higher prices in China, curbing their spot volumes

for other markets. Steady, and low, term prices have also

spurred rm demand for these supplies, adding to their

limited spot availability.

Offers of light grades remained at around $425-440/t

cfr. Some producers sought to raise their price offers for

next month. But buyers had little difculty nding offers at

similar levels to February supplies.

Offers of Group II heavy grades were at around $550-

560/t cfr. Buyers preferred to hold back in anticipation of

a pick-up in availability of domestic supplies at much lower

price levels. But some northeast Asian producers were

comfortable skipping sales to India for a second straight

month, as they sold such grades into China instead at higher

price levels. A producer has also curbed its spot volumes as

it builds stocks ahead of a planned shutdown in the second

quarter of the year.A large cargo of SN 500 of Iranian origin is expected

to reach India shortly. Price offers for such supplies were

around $440/t cfr. But the viscosity of some such volumes

was lower than usual, spurring buyers to seek lower prices

for the supplies.

There was a lack of offers of Group I or Group II supplies

from other markets. Discussions over a shipment of Group

I heavy grades from the US ended. Availability of Group II

base oils in the US was improving, but sellers were targeting

other markets rather than India.

Prices for supplies from Europe and Russia also remained

too high to attract buying interest.

Pakistan’s NRL changed its offer of Group I supplies to

1,000t of medium-viscosity index (MVI) bright stock and

1,000t of high-viscosity index bright stock. It had previ-

ously offered 2,000t of just MVI bright stock in a tender that

closed on 15 February.

Some buyers received offers of Group III base oils at

even lower price levels. Others pointed to tighter availabil-

ity, especially of 8cst base oils. The tighter availability has

followed some plant maintenance in Spain in January and in

Indonesia in February.

The timing of the start-up of a new Group III plant inMideast Gulf remained unclear. Some buyers expected com-

mercial availability of supplies from April or May. Others

expected production to start in the second half of the year.

The start-up of the plant has already been delayed for more

than a year.

Indian imports from Iran and UAE ’000 t

0

10

20

30

40

50

Dec 14 Apr 15 Aug 15 Dec 15

Iran UAE

Global Group II base oil prices $/t

300

400

500

600

700

800

6 Mar 15 3 Jul 15 30 Oct 15 19 Feb 16

Argus N150 cfr India Argus N150 fob AsiaArgus N100 fob US


10/29



Page 10 of 29

MIDEAST GULF

Group I $/t

Low High ±

SN 150 cfr UAE 470.00 500.00 +0.00SN 500 cfr UAE 490.00 530.00 +0.00

SN 150 (LVI) cfr UAE 390.00 430.00 +0.00

SN 500 (LVI) cfr UAE 400.00 440.00 +0.00

Group III $/t

Low High ±

4cst ex-tank UAE 710.00 755.00 -5.00

6cst ex-tank UAE 715.00 765.00 -5.00

8cst ex-tank UAE 720.00 765.00 -5.00

Iran export prices $/t

Sepahan Oil * ±

SN 500 fob 490.00 +0.00

Rubber process oil fob 360.00 -20.00

Slack wax fob 650.00 +0.00

* prices on a fob Bushehr basis, effective from 4 - 10 December

Vessel enquiries: UAE t


AG WCI 5-10 Mar 3,000-5,000


Mideast Gulf base oil prices have held rm. Trade remained

scarce amid weak demand and as credit issues continued to

plague the region.Many credit-strapped rms in the region are facing cash

ow challenges, which have curbed buying interest further.

Buyers are reluctant to commit to larger shipments to avoid

price risks amid volatile crude and base oils prices. Some are

struggling to clear higher priced inventories while demand

has waned with customers buying on an as-need basis.

But the crimp in supplies has helped support prices

within the region at steady levels, even when crude prices

have continued to fall in the past month. Some sellers have

also managed to bolster sales by supplying customers whose

suppliers have shuttered.

There was more interest in Group I heavy grade product

from Iran as these supplies were less restricted by credit

concerns. In contrast, interest in Group II and III base oils

cargoes was scarce as these supplies typically required

credit facilities. More attractive credit terms were also be-

coming available for such supplies, although letters of credit

in US dollars remained unavailable for now.

Iranian heavy grade prices held at $420-430/t cfr UAE,

with light grade supplies at similar levels. But offers as high

as $440/t fob Iran were also seen from one renery. Bright

stock supplies were limited.

A renery is also directly marketing its heavy gradeproduct to Asia-Pacic. But steady fob Asia prices in recent

weeks have made these supplies less competitive compared

with other Group I products in this region. Another renery

will likely have bright stock supplies in March.

Ex-tank prices supported by tightness

Limited bulk volumes entering the region have helped crimp

supplies and support ex-tank prices. Offers of SN 500 held at

$450-460/t ex-tank UAE. Offers of SN 150 fell to similar lev-

els to SN 500 as new supplies of this grade became available.

There was limited availability of bright stock, with offers of

Iranian and Pakistani origin in a wide range above $950/t

ex-tank UAE. But bright stock demand was weak as seasonal

demand for greases fades.

Group II price offers held in a wide range as sellers still

struggled to clear higher priced stocks bought earlier. Offers

of Group II N500 held rm at $670-680/t ex-tank UAE but

there were also higher prices above $700/t. Offers of N150

were steady at $570/t ex-tank UAE.

Group III prices were also in a wide range. Price offers

were above and below the $780/t ex-tank UAE level, partly

reecting the time when the supplies were bought.

Black Sea vs UAE (LVI) $/t

-150

-100

-50

0

50

100

27 Feb 15 26 Jun 15 23 Oct 15 19 Feb 16

SN 150 SN 500


11/29



Page 11 of 29

European base oils prices have weakened, pressured by weak

demand and rising volumes of imported supplies.

Slow demand and rising competition from Baltic supplieshas spurred a build-up of European supplies, including bright

stock, in the domestic market. The increased supplies have

prompted producers to seek to place their surplus supplies

in overseas markets. But they face growing competition from

lower priced Baltic supplies in these markets too.

Arbitrage opportunities are limited, with the exception

of the African market. Several African tenders released

recently could absorb some of the surplus volumes.

Base oil margins remained frm despite a slight recovery

in crude and feedstock prices. The strong margins coupled

with weak diesel and gasoline values prompted producers to

maximise production.

Demand remains sluggish. Most domestic buyers face lit-

tle pressure to top up their tanks. Falling prices led blenders

to hold back from committing to larger volumes until prices

have stabilised. Producers were offering supplies of solvent

neutrals at discounts to the low end of published prices. The

open arbitrage to move supplies from the Baltic market to

Europe continued to attract supplies of SN 500 at substantial

discounts to domestic European prices.

Domestic bright stock volumes were available around

the low end of published prices. But at least one producer

continued to target the high end of the price range.Scheduled maintenance shutdowns could help curb

some of the surplus volumes. A southern European producer

planned to restart one of its two crude units this week

following the completion of a two-week long turnaround.

Another southern European producer is expected to start a

45-day turnaround in early April. Several Russian plants will

start scheduled maintenance in March and April.

EUROPE

Group I $/t

Low High ±



Bright stock fob domestic NWE 895.00 930.00 -5.00



Bright stock fob European export 815.00 855.00 -25.00

Group II €/t $/t


N150 fca ARA 639.00 675.00 +12.50 710.00 750.00 +0.00

N600 fca ARA 742.00 769.00 +14.00 825.00 855.00 +0.00

Group III €/t $/t


4cst fca NWE 750.00 780.00 -5.00 834.00 867.00 -21.50

6cst fca NWE 765.00 800.00 -5.00 850.00 889.00 -22.50

8cst fca NWE 750.00 785.00 -5.00 834.00 873.00 -21.50

Turkey Group I $/t

Low High ±

SN 150 cfr Gebze 460.00 500.00 -5.00

SN 500 cfr Gebze 495.00 535.00 -5.00

Crude $/bl

±

North Sea Dated 33.51 +4.78

SN 500 premium to North Sea Dated 44.71 -6.19

Oil products

±

Heating oil 0.1% barge ($/t) 310.25 +45.75

Vacuum gasoil 0.5% barge ($/t) 223.00 +26.25

Vacuum gasoil 1.6% barge ($/t) 210.38 +26.13

Fuel oil 3.5% barge ($/t) 136.50 +11.00

Straight run M-100 fuel oil cargo ($/t) 144.00 +10.00

Oil products premiums

Heating oil premium to crude ($/bl) 8.17 +1.37

Heating oil premium to VGO 1.6% ($/bl) 10.81 +2.32

SN 500 premium to heating oil ($/bl) 36.54 -7.56

SN 500 premium to VGO 1.6% ($/bl) 47.35 -5.24

European SN 500 premium to Ice gasoil $/t

0

50

100

150

200

250

300

350

27 Feb 15 26 Jun 15 23 Oct 15 19 Feb 16

Ice gasoil front month = 0


12/29



Page 12 of 29

EUROPE

European forward premium to gasoil $/t

SN 150 SN 500

Midpoint ± Midpoint ±

Mar 2016 161.80 -11.45 254.30 -16.45

Apr 2016 155.35 -11.20 247.85 -16.20

May 2016 149.50 -11.10 242.00 -16.10

2Q 2016 149.55 -11.15 242.05 -16.15

3Q 2016 131.50 -10.95 224.00 -15.95

The premium shows the implied forward-curve protability of fob Europe SN 150

and SN 500 relative to Ice gasoil futures.


European forward prices $/t

SN 150 SN 500

Low High +/- Low High ±

Mar 2016 452.50 472.50 -5.00 545.00 565.00 -10.00

Apr 2016 458.95 478.95 -5.25 551.45 571.45 -10.25

May 2016 464.85 484.85 -5.30 557.35 577.35 -10.30

2Q 2016 464.75 484.75 -5.30 557.25 577.25 -10.30

3Q 2016 482.85 502.85 -5.45 575.35 595.35 -10.45


its existing prot margin relative to Ice gasoil futures.


Vessel enquiries: Europe t


Hamburg Le Havre End-Feb 2,000

Rdam, P Jerome Uddevalla 25-27 Feb 3,585


Spread between Group I, II prices grows

Group II prices held steady, but their premium to Group I

prices continued to widen. The growing premium of Group IIprices above domestic Group I prices is slowing the region’s

transition to the higher quality base oils. Some blenders

were seeking to use Group I base oils for as long as possible

because of concerns about the risk of relying on an insuf-

cient number of suppliers of Group II base oils.

The arbitrage to move volumes of Group II light-grade

base oils from Asia-Pacic to Europe remained open. But it

has yet to attract large and steady volumes of such supplies.

The long voyage from Asia-Pacic, as well as concern about

the regularity of such shipments, is dampening buying inter-

est.

Group III prices eased amid plentiful supplies. Non-ap-

proved base oils were available at the low end of the price

range. Group III supplies with approvals were mostly offered

at the high end of the range of up to a $50/t premium to the

high end.

Prices in the export market fell, pressured by rising

supplies and the limited number of outlets. Baltic supplies

displaced some of the European volumes in Africa, reecting

the increase in competition from this supply source.

There is a surplus of bright stock in Europe that pro-

ducers are seeking to clear in the export market. Several

producers have offered volumes at substantial discounts tothe low end of published prices.

Supplies of solvent neutrals were plentiful. Some sellers

were offering discounts to the low end of published prices.

But these discounts were less substantial than for those

offered for bright stock. The continuing shutdown at the

Samir renery in Morocco continued to support demand for

light-grade base oils.

Several African tenders were released that could absorb

some of the surplus Group I base oils in Europe, in particular

bright stock. Egypt is seeking 2,700t of bright stock for de-

livery in March. The tender has yet to be awarded. Bids have

closed for Ghana’s requirement of 24,000t of base oils for

delivery during the year. The tender for delivery of 5,500t

of base oils to Lagos, Nigeria has been awarded. It is unclear

from where the volumes will come from.

European 4cst vs SN 150, vs US 4cst $/t

-200

-100

0

100

200

300

400

6 Mar 15 3 Jul 15 30 Oct 15 19 Feb 16

Vs SN 150 fob domestic NWE Vs 4cst US domestic


13/29

Market Reporting

Consulting

Events

Petroleum

illuminating the markets

Argus Base Oils OutlookA monthly forecast of key base oils prices spanning 12 months into the future.

Key Benefits:

∙ Facilitates short-term planning/budgeting

∙ Provides third-party reference price to measure against internal price targets

∙ Reduces exposure to spot price volatility

Contact us now for a complimentary issue!

Email : [email protected]

Website : www.argusmedia.com/oil products/

argus-base-oils-outlook


14/29



Page 14 of 29

EUROPE

Freight rates to Gebze, Turkey $/t

Route 3,000t 5,000t Route 3,000t 5,000t

Black Sea 22-24 16-19 Antwerp 55-60 45-50Augusta 39-41 29-31 Baltic 82-87 72-77

UAE 90-95 80-85 Mumbai 90-95 80-85

* provided at market close on 18 February by Borachart (www.borachart.com)

Turkish base oil prices fell amid competitive price offersfrom the Black Sea and European markets. But most buyers

faced little pressure to replenish their stocks.

Supplies of SN 150 were available at around $480-490/t

cfr Gebze from the Black Sea market. A vessel loaded 2,000t

of SN 150 ex-Kavkaz to take to Gebze.

European supplies were available at competitive price

levels, with premiums as high as $25/t to Black Sea cargoes.

A Mediterranean producer was looking to clear some of its

surplus supplies in the Turkish market. It offered supplies of

solvent neutrals at a discount to the low end of published

prices. But there was no buying interest.

Prices slid in the ex-tank market. Supplies of SN 150 were

available in a $520-530/t range. Price offers for supplies

of SN 500 were at around a $30/t premium to these price

levels.

Turkey’s only domestic base oils producer kept its prices

steady for all grades. But prices slipped in US dollars be-

cause of the weakening Turkish lira. Supplies of SN 150 were

offered at 1,720 Turkish lira/t ($579/t), SN 500 at TL1,850/t

and bright stock at TL2,490/t. Supplies of SN 100 were avail-

able at TL1,700/t.

US 0

Ukraine 0

Turkmeninstan 0

Uzbekistan 245

Russia 13,594

Serbia 0

Poland 0Netherlands 200

Morocco 0

Italy 2,369

Iran 0

India 0

Hungary 0

Greece 13,899

France 21

Spain 746

Germany 2

Brazil 0

Belgium 5,307

TURKEY’S KEY BASE OIL SUPPLIERS - DEC 2015 t

TURKEY

Turkish base oil imports $/t

30

40

50

60

70

80

Jan May Sep|

Dec

2013 2014 2015


15/29



Page 15 of 29

RUSSIA AND FSU

Baltic Sea Group I $/t

Low High ±

SN 150 fob 380.00 420.00 +0.00SN 500 fob 460.00 500.00 +0.00

Black Sea Group I $/t

Low High ±

SN 150 fob 400.00 440.00 +0.00

SN 500 fob 420.00 460.00 +0.00

Naushki Group I $/t

Low High ±

SN 150 cpt 240.00 280.00 -10.00

SN 500 cpt 280.00 320.00 -10.00

Russian base oil, lubes rail/river exports by supplier ‘000t

Jan Dec ± Jan Dec ±

Volgograd 23.45 6.42 +17.03 Yaroslavl 6.90 6.39 +0.51

by rail 23.45 6.42 +17.03 Ufa 0.61 3.75 -3.14

by river 0.00 0.00 +0.00 Orgkhim 2.58 4.61 -2.03

N.Novgorod 0.00 0.00 +0.00 Obninsk 0.63 1.41 -0.78

Perm 22.32 26.49 -4.17 Sofrino 0.94 0.79 +0.15

Novokuibyshevsk 9.17 9.19 -0.02 Orenburg 0.00 0.00 +0.00

Angarsk 10.36 9.67 +0.69 Omsk 10.14 12.54 -2.40

Nizhnekamsk 0.26 1.11 -0.85 Other 4.69 8.76 -4.07

Total 92.05 91.13 +0.92

Russian base oils, lubes rail/river exports ‘000t

Jan Dec ± Jan Dec ±

Rail

Overland 25.97 35.72 -9.75 Baltic 42.49 51.53 -9.04

Afganistan 0.00 0.00 +0.00 Kaliningrad 21.04 18.82 +2.22

Armenia 0.00 0.00 +0.00 Liepaja 7.15 22.02 -14.87

Azerbaijan 0.30 0.67 -0.37 Riga 12.02 7.92 +4.10

Belarus 2.51 1.33 +1.18 Ventspils 2.28 1.46 +0.82

China 6.32 4.88 +1.44 St.Petersburg 0.00 1.31 -1.31

Hungary 0.00 0.00 +0.00

North Korea 0.00 0.00 +0.00 Black Sea 21.41 1.36 +20.05

Finland 1.24 1.38 -0.14 Temryuk 0.00 0.00 +0.00

Kazakhstan 2.23 3.59 -1.36 Yeisk 3.52 0.00 +3.52

Kyrgyzstan 0.48 0.47 +0.01 Kavkaz 0.77 0.71 +0.06

Latvia 4.93 12.08 -7.15 Novorossiysk 0.18 0.65 -0.47

Lithuania 0.35 1.60 -1.25 Reny 0.00 0.00 +0.00

Moldova 0.06 0.18 -0.12 Odessa 0.00 0.00 +0.00

Mongolia 0.17 0.33 -0.16 Azov 16.94 0.00 +16.94

Romania 1.00 0.87 +0.13

Poland 0.48 1.17 -0.69 River

Georgia 0.00 0.29 -0.29 Volgograd 0.00 0.00 +0.00

Tajikistan 0.60 1.16 -0.56

Turkmenistan 0.34 0.65 -0.31 Far East

Ukraine 4.69 4.43 +0.26 Nakhodka 2.22 2.17 +0.05

Uzbekistan 0.27 0.64 -0.37

Total Russia rail, river exports 92.05 91.13 +0.92

Base oils prices held steady in the Baltic and Black Sea

regions, with supply and demand in those markets relatively

balanced. Prices for base oils in the Naushki market eased asdemand in China weakened.

Trading activity in the Baltic market was moderate, with

European buyers dominating the market. Two cargoes were

lined up to load supplies from the Baltic bound for Europe

this week. A Russian producer plans to load a 6,000t cargo

on the vessel Sichem Orchid from its Svetly terminal in Kalin-

ingrad. This cargo will be bound for Amsterdam-Rotterdam-

Antwerp. About 3,800t of base oils was loaded on the vessel

Amber 1, which is bound for the UK.

Another cargo of up to 3,500t of base oils is scheduled

to be loaded in late February or early March from one of the

Latvian ports, bound for the UK.

Demand in Nigeria has stayed muted for more than a

month as local importers faced nancial problems caused by

foreign currency trading restrictions in the country. Nigeria

is a key outlet for heavy grades for Baltic exporters, which

were seeking another outlet for the heavy grades stored at

their terminals. A cargo of mostly heavy grades could be

bound for Morocco, with loading planned for early March.

Prices for Russian base oils rmed this week on a cpt

Posin basis at the Russian-Latvian border as some producers

cut their supplies. Prices for SN 150 were mostly within a

wide $350-400/t range, and for SN 500 in a $380-430/t cptrange. Transportation and throughput costs to fob Latvian

ports are estimated at around $35-40/t.

Prices at the Naftan Belarus renery held steady, but

eased in US dollar terms because of the appreciation of the

euro exchange rate. The lower US dollar price attracted

some buying interest. The producer sold just 240t of SN 150

this week at €320/t ($356/t) fca renery. The price is $6/t

lower than last week. This cargo is likely bound for Latvian

Russian rail exports via Baltic ⁄ Black Sea ’000 t

0

25

50

75

100


Total Baltic Sea Black Sea


16/29



Page 16 of 29

Russian and Belarusian base oil export duty * $/t

Mar 2016 Feb 2016 Jan 2016 Dec 2015 Nov 2015 Oct 2015

15.80 20.80 29.30 42.40 46.60 43.90

Sep 2015 Aug 2015 Jul 2015 Jun 2015 May 2015 Apr 2015

52.40 63.80 68.60 69.30 55.90 62.70

* tax paid by producer for base oils export outside of Russia, Belarus, Kazakh-

stan, Tajikistan and Kyrgyzstan

RUSSIA AND FSU

Ufa renery base oil offers and trades, 12-18 Feb

GradeVolumeoffered

(t)

Price, fca

(Rub/t) *Price, fca

($/t) *

Exportprice, fca

($/t) ‡

Volumesold,

(t)

I-12A 0 28,500 366 321 130

I-20A 0 24,300 312 277 780

I-40A 0 25,484 327 289 845M-20 0 30,000 385 336 130

* prices include 18% VAT ‡ VAT excluded, export duty added

— SPIMEX

ports. Transportation and throughput costs are estimated

around $45-50/t.

Naftan was also offering 1,000t of SN 1200 at €460/t($512/t) and 500t of Group III 4cst at $445/t fca renery. No

deals were done at these prices.

Rosneft issued a new export tender on 17 February for

supplies in March. The producer offered up to 1,300t of SN

80, 1,200t of SN 150, 2,000t of SN 400 and 1,000t of bright

stock originating from the Yaroslavl renery and up to 3,700t

of SN 150, 4,000t of SN 350, 780t of SN 500 and up to 4,000t

of SN 900 from its Novokuibyshevsk lube plant. The tender

closed on 19 February, with the winner to be announced by

1 March.

Bids for the supplies were expected to nudge higher,

especially for light grades, in response to moves by some

producers to cut their export supplies in March because

of stronger buying interest in Russia’s domestic market.

Gazpromneft also plans to halve its production at the Omsk

renery in March for maintenance work at its base oils unit.

But the impact on SN 900 and bright stock was expected

to be smaller because of ample stocks of these products at

the Baltic terminals caused by the lack of demand in west

Africa.

Prices in the Black Sea region were stable, with tight

supplies countered by moderate buying interest in Turkey.

Turkish buyers were targeting prices for SN 150 at $390-400/t fob Black Sea. Local sellers were mostly offering base

oils within a $420-440/t fob range.

Such price levels spurred Turkish importers to target

supplies from Europe and Iran instead. Supplies of on-spec-

ication SN 150 were offered at $420/t fob Greece. But no

deals were done.

Prices slipped in the Naushki market amid weak buying

interest in China even after the completion of a long public

holiday to celebrate the lunar new year. Rosneft issued a

new export tender on 17 February to offer base oils originat-

ing from its Angarsk renery.

The company offered up to 600t of SN 250, 1,200t of SN

450, 180t of SN 650 and 800t of SN 1200. The tender closed

on 19 February, with the nal results to be announced by 1

March.

Most Chinese buyers were targeting lower prices than a

month earlier. Some importers held off participating in the

new tender.

The Argus Russian diesel index eased by 0.3pc to 30,850

roubles/t ($396/t), pressured by abundant supplies in the

European part of Russia.

The Russian and Belarusian export duty for base oils fell

by $5/t in March to $15.80/t.

Baltic loadings t

Port/terminal Vessel Next port Volume B/L Date

Liepaja Amber 1 UK 3,800 17-18 Feb

Svetly Sichem Orchid ARA 6,000 17-18 Feb

Liepaja Agath Rotterdam 2,700 11 Feb

Gdansk Amaranth Hull 3,500 7 Feb

Liepaja Fjellstraum ARA 4,800 5-6 FebRiga Antracyth Dordrecht 3,700 25-26 Jan

Liepaja Leon Ghent 3,150 23-24 Jan

Lpaja/Gdansk/ Rio Dauphin WAF 10,500 22-25 Jan

Svetly Crline Essberger Rotterdam 2,300 21-22 Jan

Liepaja Amonith Dordrecht 3,500 20-21 Jan

Svetly Besiktas Galata Ghent 2,700 17-18 Jan

Liepaja Maria Theresa Dordrecht 3,500 14-15 Jan

Svetly Georg Essberger Rotterdam 3,500 4 Jan

Liepaja Cansu D Antwerp 3,300 4 Jan


17/29



Page 17 of 29

F I N LAND

Lithuania

Norway

D n e p r

Azov Sea

Black Sea

CaspianSea

Aral Sea

D n e s t r

Don

V o l g

a

K a m a

U r a

l

O k a

D n e p r

I r t y

s h

I s h i

m

T o b o

l

Y e n i s e i

Y e n i s e i

A n g a r

a

LakeBaikal

A m u r

S e a o

f J a p

a n

White Sea

O n e g a

S e v e r n a y a D

v i n a

O b

Y e n i s e i

O b

Mediterranean Sea

Barents Sea

Kara Sea

D a n u b e

SakhalinIsland

St Petersburg

Helsinki

Tallinn

RigaLiepaja

KaliningradVilnius

Minsk

Kiev

Yaroslavl

Moscow

Odessa

Novorossiysk

Tbilisi

Yerevan

Ashkhabad

Tashkent

Dushanbe

Tehran

Ankara

Warsaw

Bishkek

Volgograd

NizhnyNovgorod

Perm

Ufa

Orsk

Omsk

Novopolotsk

Constanta

Astana

SWEDEN

RUS S I A

MONGOL I A

CH I NA JAPAN

TAJIKISTAN

KYRGYZSTAN

UZBEKISTAN

TURKMENISTAN

KAZAKHS TAN

I RAQ

S Y R I A

TURKE Y ARMENIA

AZERBAIJAN

GEORGIA

ALBANIA

GRE E CE

MACEDONIA

BULGARIASERBIA

BOSNIA

CROATIA

HUNGARY

ROMAN I A

P OLAND

BE LARUS

LATVIA

ESTONIA

UKRA I N E

M O L D O V A

Novokuibyshevsk

Feodosiya

Reni

Nikolaev

Kavkaz

Refinery

City/town

Port

Kremenchug

Turkmenbashi FerganaBaku

RUSSIA AND FSU

Ufa $/t

To Baltic Sea 378

To Black Sea 335To Naushki 169

Omsk $/t

To Baltic Sea 355

To Black Sea 307

To Naushki 197

Volgograd $/t

To Baltic Sea 387

To Black Sea 369

To Naushki 133

Perm $/t

To Baltic Sea 383

To Black Sea 327

To Naushki 169

* price calculated by subtracting transport costs and taxes between the producer and the fob Baltic, fob Black Sea and cpt Naushki pricing point.

FSU KEY PRODUCERS’ SN 500 PRICE (NETBACK) * $/t

Russian base oils and lubricants rail exports ’000 t

0

25

50

75

100


China Others

Tatneft Group II & III base oil offers and trades, 12-18 Feb

Grade

Price,

fca(Rub/t) *

Price,

fca($/t) *

Exportprice,

fca($/t) ‡

Volume

sold,(t)

HVI-2 (Group II+, 2cst) 58,965 746 632 -

VHVI-4 (Group III, 4cst) 67,664 856 723 -

* prices include 18% VAT ‡ VAT excluded, export duty added

Russian domestic base oil supplies ‘000t

Supplier Jan 16 ± Dec 15

Lukoil Volgograd 23.77 -6.33

Rosneft Novokuibyshevsk 14.03 -5.09

Bashneft Ufa 10.73 -2.61

Lukoil Perm 6.25 -3.20

Rosneft Angarsk 7.24 -1.13

Gazpromneft Omsk 5.69 -1.93

Gazpromneft/Rosneft Yaroslavl 5.49 0.79

Orgkhim 2.48 -0.36

Tatneft Nizhnekamsk 0.90 0.00

Rosa-1 0.48 0.00

Lukoil Tyumen 0.79 -0.41

Shaumyan lube plant 0.35 -0.15

Devon Group 0.49 0.33

Sofrino lube plant 0.00 -0.16

Rosneft Ryazan 0.24 0.18

Experimental plant Neftekhim 0.03 -0.19

Obninskorgsintez 0.00 -0.03

Others 35.63 -13.07

TOTAL 114.59 -33.36

Angarsk $/t

To Baltic Sea 298

To Black Sea 252

To Naushki 253


18/29



Page 18 of 29

US

Group I bulk export prices $/USG $/t


SN 150 fob 1.24 1.40 -0.02 376.00 424.00 -6.00

SN 500 fob 1.99 2.15 -0.03 593.00 641.00 -9.00

Bright stock fob 2.73 2.89 -0.10 803.00 850.00 -29.00

Group II bulk export prices $/USG $/t


N100 fob 1.24 1.40 -0.02 384.00 434.00 -6.50

N220 fob 1.23 1.39 -0.04 375.00 424.00 -12.00

N600 fob 2.20 2.36 -0.10 660.00 708.00 -30.00

Domestic prices $/USG $/t


Group I

SN 150 1.32 1.47 -0.01 400.00 445.00 -3.00

SN 500 2.17 2.32 -0.05 647.00 691.00 -15.00

Bright stock 3.19 3.35 -0.05 938.00 985.00 -15.00

Group II

N100 1.29 1.45 -0.01 400.00 450.00 -4.50

N220 1.30 1.46 -0.02 397.00 445.00 -6.00

N600 2.29 2.45 -0.08 687.00 735.00 -24.00

Group III

4cst 2.57 2.73 +0.00 810.00 860.00 +0.00

6cst 2.59 2.75 +0.00 816.00 866.00 +0.00

8cst 2.67 2.83 +0.00 841.00 891.00 +0.00

Naphthenic domestic prices $/USG $/t


Pale oil 60 2.02 2.18 -0.01 599.00 646.00 -2.50

Pale oil 100 2.05 2.21 -0.02 601.00 648.00 -6.00

Pale oil 500 2.10 2.26 -0.02 603.00 649.00 -6.00

Pale oil 2000 2.27 2.43 +0.00 648.00 693.00 +0.00

Naphthenic bulk export prices $/USG $/t


Pale oil 60 fob 1.42 1.59 -0.03 421.00 471.00 -9.00

Pale oil 100 fob 1.41 1.58 -0.03 413.00 463.00 -9.00

Pale oil 500 fob 1.50 1.66 -0.02 431.00 477.00 -6.00

Pale oil 2000 fob 1.61 1.77 +0.00 459.00 505.00 +0.00

US base oils prices have fallen as several more Group II and

Group I producers cut prices.

The price falls come after Motiva announced cuts to allof its Group II grades last week. The company cut its price

for N105 by 15¢/USG, N220 by 20¢/USG and N600 by 25¢/

USG. The changes took effect from 16 February. The com-

pany’s adjustment prompted the second series of Group II

and Group I producer price cuts in less than a month.

Flint Hills Resources announced on 16 February cut prices

for its Group II supplies with effect from 17 February. The

company will reduce its N70/75 and N100 prices by 15¢/USG,

N230 by 20¢/USG and N600 by 22¢/USG.

Phillips 66 similarly notied its customers on 17 February

that it would cut its Group II N70, N80, N110 by 15¢/USG, its

N220 by 20¢/USG and its N600 by 25¢/USG, all effective 18

February.

ExxonMobil notied its customers on 18 February of price

cuts for its Group I and Group II/II+ products. The company

cut its prices for Group I SN 100 and SN 150 by 15¢/USG and

lowered its SN 300, SN 600 and bright stock prices by 20¢/

USG, according to its customers. The company similarly cut

its Group II+ light viscosity grade by 15¢/USG and cut its

Group II mid-viscosity grade by 20¢/USG. The changes take

effect on 22 February.

The changes that went into effect this week are reect-

ed in the Argus Base Oils price table this week. The adjust-ments that go into effect next week will be reected in next

week’s report.

The other Group II and Group I producers continue to

evaluate their positions. The price cuts come as crude prices

rebounded slightly this week after falling to a 13-year low

last week.

The seasonal pick-up in demand that typically begins in

the second half of February has yet to materialise. Blenders

continue to hold off buying in anticipation of further price

falls.

Demand continues to be tempered by readily available

surplus supplies of all grades and the volatility in base oil

and feedstock prices.

US base oils production is expected to rise in March fol-

lowing the completion of maintenance at several Group I and

Group II reneries in January and February. The market is

already showing signs of increased surplus availability, as the

heavy grade supply-tightness eases.

Several Group I and Group II reneries are expected to

nish maintenance by the end of the month. Production

problems that had suppressed heavy-grade output at several

Group I and II plants in the second half of last year have


19/29



Page 19 of 29

US

Crude $/USG $/bl

± ±

Nymex WTI crude front month 0.73 +0.11 30.77 +4.56

SN 500 premium to WTI 1.34 -0.14 56.19 -5.83

Argus Sour Crude Index (ASCI™) 0.68 +0.14 28.69 +5.86

SN 500 premium to ASCI™ 1.39 -0.17 58.27 -7.13

Oil products $/USG $/bl ± ±

NYH heating oil barge 0.95 +0.04 40.08 +1.79

Low sulphur VGO 0.5% cargo 0.86 +0.12 36.27 +5.31

High sulphur VGO 2% cargo 0.80 +0.10 33.77 +4.31

USGC 10ppm diesel 62 cargo 1.04 +0.09 43.59 +3.64

Oil products premiums

Heating oil premium to WTI 0.22 -0.07 9.31 -2.77

Heating oil premium to VGO 2% 0.15 -0.06 6.31 -2.52

SN 500 premium to heating oil 1.12 -0.07 46.88 -3.06

SN 500 premium to VGO 2% 1.27 -0.13 53.19 -5.58

US SN 500 forward prices $/USG $/t


Mar 2016 2.05 2.10 -0.03 609.40 624.30 -8.95Apr 2016 2.06 2.11 -0.03 613.20 628.10 -9.20

May 2016 2.07 2.12 -0.04 618.20 633.10 -9.40

2Q 2016 2.08 2.13 -0.03 618.40 633.30 -9.45

3Q 2016 2.14 2.19 -0.03 636.70 651.60 -10.15


its existing prot margin relative to Nymex heating oil futures.


US SN 500 forward premium to heating oil

$/USG $/t

Midpoint ± Midpoint ±

Mar 2016 1.05 -0.05 312.60 -16.20

Apr 2016 1.04 -0.05 308.80 -15.95

May 2016 1.02 -0.05 303.80 -15.75

2Q 2016 1.02 -0.05 303.95 -14.903Q 2016 0.96 -0.05 286.10 -14.90

The premium shows the implied forward-curve protability of fob US export SN

500 relative to Nymex heating oil futures.


been resolved, easing the tightness in these markets. Inter-

est remained to move 3,000-6,000t of bright stock from the

US to China.Group I heavy neutrals and bright stock are oversupplied

despite turnarounds at several reneries this month.

A major Group I producer completed a turnaround this

week. The maintenance began in early February and af-

fected heavy neutrals and bright stock production. The pro-

ducer did not offer any supplies in the spot market while it

was down for maintenance and will continue to have limited

availability as it rebuilds its inventories.

A major Group II producer will complete maintenance

at its renery next week. The producer began maintenance

on one of its three production trains shortly after the new

year. The US Gulf coast rener completed the turnaround

on its base oils unit two weeks ago, but has been running

at reduced rates as maintenance continued on a crude unit.

The shutdown at the plant is expected to be completed next

week.

Another major Group II producer began a turnaround this

week. The maintenance is expected to last two weeks. The

rener has had limited to no surplus supplies available ahead

of the turnaround.

Export interest lingers

The Group II supply situation is mixed. Several Group II pro-ducers are balanced to tight because of plant maintenance,

while another major producer has surplus supplies of its mid-

and heavy-viscosity grades.

Slower demand from more regular overseas outlets has

limited export movements. Surplus supplies of Group II N220

and N600 have been seen moving recently from the US Gulf

coast to Latin America at steep discounts to postings.

A strong US dollar has made it less attractive for overseas

buyers to import US supplies. Recent movements of US sup-

plies into Latin America have been done at heavily discount-

ed supplies. Logistical constraints on overseas movements

also lingered, such as limited spot cargo space on vessels.

Demand for US Group II base oils in Latin America is

steady.

A Colombian tender seeking 4,400t of Group I and Group

II mid- and heavy-viscosity base oils for delivery in March

closed last week. This cargo is expected to load in the US

Gulf coast in late February.

Monthly shipments of Group II base oils from the US Gulf

coast to South America continue to ow.

Small volumes of Group II and Group III supplies from

Asia-Pacic continue to move to Latin America in exibags

at heavily discounted values.

US SN 500 premium to VGO 2% $/USG

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

8 Mar 13 28 Feb 14 27 Feb 15 19 Feb 16


20/29



Page 20 of 29

US

A 10,000t cargo made up of mostly Group II base oils

from the US Gulf coast loaded on a vessel this week bound

for Brazil.A large volume of 12,000-15,000t of mostly heavy grade

base oils loaded in the US Gulf coast bound for west Africa.

Vessel fxtures: US

Vessel Loading port Next port B/L Date Volume, t Freight, $/t

Brenthomen USGC Nigeria 12 Feb 12,000-15,000 ---

TBD USGC Colombia end-Feb 4,400 ---

Jbu Opal Houston Rio de Janiero 15 Feb 10,000 ---


US SN 500 premium to heating oil $/USG

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

27 Feb 15 26 Jun 15 23 Oct 15 19 Feb 16

Nymex heating oil front month = 0

US base oil exports to Brazil ’000 bl

0

100

200

300

400

500

Nov 06 Nov 09 Nov 12 Nov 15

NAPHTHENIC BASE OILS

US naphthenic base oils prices fell slightly as supplies re-mained plentiful despite turnarounds at major reneries in

the last couple of months.

A major naphthenic base oils producer started a month-

long turnaround in early February. This producer is expected

to have limited spot supply availability while its plant is

down, especially of the heavy grade naphthenics. The pro-

ducer recently announced a price cut for its naphthenic base

oils.

Another major producer completed maintenance in early

February and is rebuilding inventories.

Another producer that suffered a re in January contin-

ued repair work alongside routine maintenance activity. The

renery expects to be back on line by the end of this month.

This shutdown enabled some inventory draws, allowing

other naphthenic producers to avoid price decreases in the

short term. The drop in production as a result of the ren-

ery maintenance has helped balance supplies of the heavy

grade naphthenics.

Naphthenic base oil values have decreased slightly rela-

tive to crude prices. The premium of pale oil 60 to four-

week-average Light Louisiana Sweet crude slid to $56.28/bl.


21/29



Page 21 of 29

US POSTED PRICES $/USG

Group I *

ExxonMobil Gulf coast HollyFrontier Paulsboro Refning east coast Calumet Shreveport

Effective $/USG ± Effective $/USG ± Effective $/USG ± Effective $/USG ±

70/75 21 Jan 16 1.94 -0.15

100 22 Jan 16 2.00 -0.10 21 Jan 16 1.94 -0.15 27 Jan 16 2.25 -0.10

150 22 Jan 16 2.05 -0.10 21 Jan 16 2.12 -0.15 27 Jan 16 2.20 -0.10

250 21 Jan 16 2.08 -0.15

300/350 22 Jan 16 1.97 -0.15

500 21 Jan 16 2.98 -0.15 27 Jan 16 2.84 -0.15

600/650 22 Jan 16 2.70 -0.15 27 Jan 16 3.10 -0.15

700 27 Jan 16 2.87 -0.15

Bright stock 22 Jan 16 3.94 -0.12 21 Jan 16 3.97 -0.15 27 Jan 16 4.09 -0.12 27 Jan 16 4.12 -0.15

Group II *

Phillips 66 Gulf coast Chevron Gulf coast Motiva Gulf coast FHR Gulf coast

Effective $/USG

± Effective $/USG

± Effective $/USG

± Effective $/USG

±

70 18 Feb 16 1.80 -0.15 17 Feb 16 1.78 -0.15

75/80 18 Feb 16 1.80 -0.15 17 Feb 16 1.78 -0.15

100/120 18 Feb 16 1.75 -0.15 27 Jan 16 1.85 -0.10 16 Feb 16 1.70 -0.15 17 Feb 16 1.72 -0.15

200/220 18 Feb 16 1.85 -0.20 27 Jan 16 1.95 -0.15 16 Feb 16 1.80 -0.20 17 Feb 16 1.80 -0.20

600 18 Feb 16 2.50 -0.25 27 Jan 16 2.75 -0.20 16 Feb 16 2.35 -0.25 17 Feb 16 2.44 -0.22

Group II *

Calumet Shreveport Effective $/USG ±

80 27 Jan 16 2.19 -0.10

100 27 Jan 16 2.06 -0.10

150 27 Jan 16 2.49 -0.10

325 27 Jan 16 2.85 -0.15

Group II+ *

SK Lubricants Gulf coast Phillips 66 Gulf coast

Effective $/USG ± Effective $/USG ±

50/60 29 Jan 16 3.17 -0.10

70/80 01 Feb 16 3.74 -0.10 29 Jan 16 3.27 -0.10

Group III *


Effective $/USG ± Effective $/USG ±

4cst 01 Feb 16 4.01 -0.10 29 Jan 16 3.48 -0.10

6cst 01 Feb 16 4.01 -0.10

8cst 01 Feb 16 4.04 -0.10 29 Jan 16 3.58 -0.10

US domestic SN 150 vs posted prices $/USG

1.00

1.50

2.00

2.50

3.00

6 Mar 15 3 Jul 15 30 Oct 15 19 Feb 16

US SN 150 ExxonMobil HollyFrontierPaulsboro

US domestic N600 vs posted prices $/USG

2.20

2.40

2.60

2.80

3.00

3.20

6 Mar 15 3 Jul 15 30 Oct 15 19 Feb 16

US N600 Phillips 66 Chevron Motiva FHR

Group II+ *

ExxonMobil Gulf coast Effective $/USG ±

110/130 22 Jan 16 2.52 -0.10

* the ± column shows the price difference between the current and previous

posted price.

Group II *

ExxonMobil Gulf coast Effective $/USG ±

200/220 22 Jan 16 2.19 -0.15

Group II+ *

Kleen Per formance Products Effective $/USG ±

110/130 25 Jan 16 2.52 -0.10

240 25 Jan 16 2.57 -0.15


22/29



Page 22 of 29

US POSTED PRICES $/t

Group I *

ExxonMobil Gulf coast HollyFrontier Paulsboro Refning east coast Calumet Shreveport

Effective $/t ± Effective $/t ± Effective $/t ± Effective $/t ±

70/75 21 Jan 16 601.40 -46.50

100 22 Jan 16 616.00 -30.80 21 Jan 16 597.52 -46.20 27 Jan 16 690.75 -30.70

150 22 Jan 16 629.35 -30.70 21 Jan 16 650.84 -46.05 27 Jan 16 664.40 -30.20

250 21 Jan 16 632.32 -45.60

300/350 22 Jan 16 596.91 -45.45

500 21 Jan 16 899.96 -45.30 27 Jan 16 852.00 -45.00

600/650 22 Jan 16 804.60 -44.70 27 Jan 16 923.80 -44.70

700 27 Jan 16 849.52 -44.40

Bright stock 22 Jan 16 1,170.18 -35.64 21 Jan 16 1,179.09 -44.55 27 Jan 16 1,210.64 -35.52 27 Jan 16 1,222.77 -44.52

Group II *

Phillips 66 Gulf coast Chevron Gulf coast Motiva Gulf coast FHR Gulf coast

Effective $/t ± Effective $/t ± Effective $/t ± Effective $/t ±

70 18 Feb 16 558.00 -46.50 17 Feb 16 551.80 -46.50

75/80 18 Feb 16 550.80 -45.90 17 Feb 16 544.68 -45.90

100/120 18 Feb 16 541.19 -46.39 27 Jan 16 571.65 -30.90 16 Feb 16 527.00 -46.50 17 Feb 16 531.91 -46.39

200/220 18 Feb 16 563.79 -60.95 27 Jan 16 594.75 -45.75 16 Feb 16 549.00 -61.00 17 Feb 16 548.55 -60.95

600 18 Feb 16 753.75 -75.38 27 Jan 16 829.12 -60.30 16 Feb 16 709.70 -75.50 17 Feb 16 735.66 -66.33

Group II *

Calumet Shreveport Effective $/t ±

80 27 Jan 16 675.83 -30.86

100 27 Jan 16 632.96 -30.73

150 27 Jan 16 762.84 -30.64

325 27 Jan 16 868.31 -45.70

Group II+ *

SK Lubr icants Gulf coast Phillips 66 Gulf coast

Effective $/t ± Effective $/t ±

50/60 29 Jan 16 1,022.32 -32.25

70/80 01 Feb 16 1,178.10 -31.50 29 Jan 16 1,046.40 -32.00

Group III *


Effective $/t ± Effective $/t ±

4cst 01 Feb 16 1,263.15 -31.50 29 Jan 16 1,104.90 -31.75

6cst 01 Feb 16 1,263.15 -31.50

8cst 01 Feb 16 1,272.60 -31.50 29 Jan 16 1,120.54 -31.30

US base oil production, sales ’000 bl

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Nov 14 Mar 15 Jul 15 Nov 15

Production Sales

US base oil exports, imports ’000 bl

-2,000

-1,000

0

1,000

2,000

3,000


Exports Imports Net imports

Group II+ *

ExxonMobil Gulf coast Effective $/t ±

110/130 22 Jan 16 788.76 -31.30

* the ± column shows the price difference between the current and previous posted price. The $/t price is converted from the $/USG price.Refer to www.argusmedia.com for methodology with the gallons-to-tonnesconversion factors.

Group II *

ExxonMobil Gulf coast Effective $/t ±

200/220 22 Jan 16 667.95 -45.75

Group II+ *

Kleen Per formance Products Effective $/t ±

110/130 25 Jan 16 785.48 -31.17

240 25 Jan 16 796.44 -46.49


23/29



Page 23 of 29

MARKET NEWS AND ANALYSIS

SK Lubricants 4Q proft surgesOperating prot at SK Lubricants, the lubes unit of South

Korea's SK Innovation, surged in the fourth quarter of lastyear to its highest level in more than three years, as slump-

ing feedstock prices slashed its costs.

Operating prot from the lube unit rose to 113.8bn won

($93.5mn) in the three months to end-December, up by 59pc

from the same period a year earlier and the highest since

the third quarter of 2012. But sales fell by 15pc in the fourth

quarter to W680.6bn.

The fall in sales reected the drop in Group III base oil

prices since the fourth quarter of 2014. Prices in northeast

Asia averaged $768/t in the fourth quarter of last year, down

by 28pc from $1,072/t during the same period in 2014. In

Europe, Group III prices averaged $901/t in the fourth quar-

ter of 2015, against $1,160/t during the same period a year

earlier.

An increase in the volume of base oil sales during the

fourth quarter helped to partially counter the impact of

lower prices.

But with sales falling and prot rising, the unit's prot

margin extended its rise to 16.7pc, also the highest in more

than three years.

The surge in prot margins mostly reected the impact

of the 46pc slump in crude prices in the fourth quarter

compared with the same period a year earlier. Group I andGroup II prices also fell steeply. But the size of the drop in

crude prices far exceeded the fall in Group III prices. Pro-

ducers have pointed to rmer demand supporting Group III

prices. But supply has also risen sharply.

Operating prot of W285bn from SK Innovation's rening

operations was more than double the prot level from the

lubricant and base oil unit. But the prot was from sales

of W7.76bn, more than 10 times the revenue from the lube

unit. The prot margin of 3.7pc was rm relative to recent

years. But the level also highlighted the value of the contri-

bution from the company's much smaller lube unit.

Thailand’s December base oil output risesThailand's base oil production rose in December to its

second-highest level in the past 18 months as strong margins

incentivised the country's reners to maintain or increase

output.

Base oil production rose to 56.31mn litres (48,500t) in

December, government data showed. This was the highest

since June. Total output of 639.8mn l in 2015 was 3pc higher

than the previous year.

Output rose in December even as outright base oil prices

slid sharply in Asia-Pacic. But the pace of the drop lagged

the even steeper slide in crude prices. Group I base oil val-

ues have subsequently risen to their rmest levels in more

than three years. Bright stock values also held unusually

strong relative to feedstock prices, incentivising reners to

maximise output of the product.

Thailand's domestic market remained a key outlet for the

reners' strong output, with demand mostly rising through-

out the year. The country's nished lube demand rose in

December for a ninth month in 10 to 46.95mn l. Sales of

562.97mn l last year were 4pc higher than year-earlier levels.

Demand rose even as automobile sales and industrial

production contracted sharply throughout most of the year.But auto sales rose in December for a second month to their

highest level in two years. Industrial production has also

started to stabilise, with output in December expanding at

its fastest pace in ve months.

Besides strong domestic base oil production, Thai-

land's supplies have been supplemented by surging imports

throughout the year, mostly from South Korea.

Total base oil imports fell by 2pc in December to

23.31mn l. But total deliveries of 320mn l in 2015 were 16pc

SK lube proft margin vs refning proft margin %

-10

-5

0

5

10

15

20

Q4 2012 Q4 2013 Q4 2014 Q4 2015

Lube profit margin (%) Refining profit margin (%)

Thailand base oil apparent demand, production mn

20

30

40

50

60


Apparent demand Production


24/29



Page 24 of 29


higher than year-earlier levels and the highest in at least ve

years.

Rising imports from South Korea accounted for most ofthe increase, as producers in that country sought to expand

outlets in southeast Asia to absorb their growing capac-

ity. Imports from the country fell to a seven-month low of

7.74mn l in December as blenders minimised stock levels be-

fore year-end or sought to top-up with supplies from nearer

supply sources. Even so, total shipments of 164mn l from

South Korea in 2015 accounted for more than half of Thai-

land's total imports and were more than 56mn l higher than

year-earlier levels. The volume also exceeded total imports

from Singapore for the rst time.

Base oil imports from Singapore rebounded in December

to a four-month high of 10.63mn l. The volume exceeded im-

ports from South Korea for the rst time since July. But total

imports of 119mn l in 2015 fell from 123mn l a year earlier,

reecting the pressure from South Korean shipments. More

supplies from Singapore moved to markets such as the US

and Europe instead.

While total base oil imports fell in December, the volume

still exceeded Thailand's base oil exports for a 12th month

in 13. Exports rose in December to a three-month high of

18.20mn l amid steady shipments to China. Total exports of

220.74mn l in 2015 were up from 203.70mn l in the previous

year and the highest in at least four years.Total shipments to China were 5.77mn l in December,

maintaining the strong rise in exports to that market since

September. The rise in volumes since then reected the

opening of the arbitrage to move bright stock to China, after

it had closed earlier in the summer. China's persistent de-

mand for the product spurred a rise in Thailand's exports to

the country to 58mn l in 2015. The volume was up from just

30mn l the previous year.

Turkey’s December base oil imports reboundTurkey's base oil imports rebounded in December to their

highest level in ve months amid widespread signs through-

out Europe of earlier-than-usual stockbuilding. There was

also a marked improvement in supplies from Russia.

Total base oil imports rose in December for the rst

time in ve months, climbing by 28pc to 41,945t. Even with

the year-end rebound, total imports of 486,225t in 2015 fell

from 529,925t in the previous year and more than 690,000t

in 2013.

The sustained slide in imports reected the impact of

increasingly tight rules governing such shipments in order

to limit their use to the production of lubricants only. The

sustained drop in Group I base oil supplies from Russia since

2014 added to the slowdown in imports. Rising deliveries

of premium-grade base oils from markets like Spain exacer-

bated the drop in demand for Group I imports.The weakness of the Turkish lira against the US dollar

dampened interest further by increasing the cost of such

imports. The currency weakness also boosted demand for

domestically-produced supplies, whose sales rose 4pc in the

rst 11 months of the year to 113,000t.

The pick-up in imports in December came at a time of

year when blenders typically seek to cut their inventories

before year-end. But demand throughout Europe was rmer

than usual at that time. The stronger buying interest came

as buyers built stocks ahead of an expected drop in supplies

early this year because of the imminent closure of several

European base oil plants.

Imports also got a boost from rising base oil produc-

tion and exports from Russia late last year. Russian base oil

exports by river from Lukoil's Volgograd plant rose to almost

16,000t in November ahead of the closure of the river sys-

tem to barge trafc during the winter months. The volume

was the largest in six months.

Turkey's base oil imports from Russia subsequently

jumped in December to a ve-month high of 13,595t. Total

imports from Russia rose to 137,400t in 2015, up from

106,410t the previous year.

The increase in Russian base oil shipments in Decembermostly reected a surge in supplies of light-grade base oils

to their highest level since July.

Turkish base oil imports from Greece recovered to

13,900t in December, from less than 9,400t the previous

month. Total shipments in 2015 surged to 174,660t, up from

less than 139,000t the previous year. The sustained rise in

supplies from Greece reected the logistical advantage of

that market relative to other suppliers in Europe, as well as

its competitive prices relative to Russian supplies.

Turkish base oil imports $/t

30

40

50

60

70

80

Jan May Sep

|

Dec

2013 2014 2015


25/29



Page 25 of 29


With rising supplies from Russia and Greece accounting

for a larger share of a shrinking volume of imports, deliver-

ies to Turkey from other key markets fell.Base oil imports from Italy fell in December to an eight-

year low of 2,370t. Total imports of 6

argus base oils.pdf

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