Most domestic importers were faced with closed arbitrage window and halted base oils importing as international base oils prices kept going up, observed C1.
As most international refineries hiked base oils ex-refinery prices in September, import margins were squeezed to almost zero. Take Group II prices as example. Imported 150N and 500N resources were traded at Yuan 8,900-9,100/mt and Yuan 9,800-9,900/mt in East China, respectively, so compared with the CFR costs, these resources would not bring any profit.
Economical resources were not available due to tight supplies in Asian countries, such as Singapore, South Korea, Taiwan, Japan and Thailand. On the other hand, most domestic end-users were reluctant to accept high offers over lingering low demand at home. Moreover, stricken by supplies of off-spec base oils, base oils prices would not increase in the near term. Thus currently domestic traders were not willing to receive exotic cargoes, mainly consuming previously hoarded inventories, said a Chinese importer.
Meanwhile, as Sinopec and PetroChina planned to supply some spot cargoes to the domestic market, most domestic traders halted importing and turned to homemade resources. They would not resume base oils importing until the arbitrage window reopened.
Late September would see increasing supplies in Asia when some Asian refineries went back into production after base oil units maintenance, C1 deemed. Then most domestic traders could reenter the importing market when base oils prices were brought back to a relatively reasonable level, estimated C1.
