A tighter supply and demand scenario lent stability to base oil pricing in Asia, although there were some corners of the market that have started to show a slight build-up of product given top operating rates at most base oil plants and softer consumption of certain grades compared to others. Activity in the key market China improved, and this encouraged buyers in other countries to secure product to avoid potentially snug supplies and higher prices in coming weeks.
Domestic supply levels in China were deemed adequate to cover most demand, but certain grades are chronically short – namely the heavy-viscosity grades – and the supply gap is typically met through imports. Demand for Group III supplies has also been on the rise. There appeared to be increasing interest in importing material in coming weeks. Imports have also been taking place because several Chinese base oil plants were either shut down for maintenance and inspections or were running at reduced rates.
While demand from the automotive segment has been slightly disappointing since the government in Beijing removed incentives for automotive purchases, upbeat expectations for manufacturing output levels meant that demand for lubricants for industrial applications could see an uptick over the next few months. Factory production in China has jumped since the end of lockdowns and rose to its highest level in more than ten years in February, bolstering the country’s economic recovery, The New York Times reported on March 2. The abrupt reversal of China’s zero-COVID policies and lifting of lockdowns resulted in a surge of infections – with estimates suggesting that up to 1.5 million people had died – but the lifting of restrictions also led to the country’s economic revival. The International Monetary Fund forecast an expansion of China’s economy of 5.2 percent this year, compared to a growth rate of 3 percent in 2022. A healthy Chinese economy also reverberates throughout the region and lifts other economies as well, experts noted.
There were inquiries to move 3,000 metric tons made up of two base oil grades from Ulsan, South Korea, to Rugao in mid-March. Another 3,000 tons might be shipped from Yeosu or Ulsan to Zhenjiang in mid-March as well.
In India, the tendency to rely more heavily on domestic supplies prevailed, as local material has been offered at attractive prices because refiners enjoy a competitive edge by processing discounted Russian crude oil. Buyers also preferred to take more product under term contracts to avoid the uncertainties connected to spot deals. The light-viscosity grades have been on the snug side and have therefore led to increased buying appetite from sources throughout the region. Some buyers appeared more agreeable to steeper offers to secure all the material they needed, while others still hesitated to accept higher prices because of adequate supplies. However, the pickup in demand from China fed concerns that regional offers might start to dry up.
Given generally steady demand, there has been an uptick in imports, with several cargoes discussed for shipment to India. About 11,000 tons were on the table for lifting in Daesan and Pyongtaek, South Korea, to Mumbai in early or mid-March. Another 4,000 tons were on the table for lifting in Ulsan or Pyongtaek to Chennai on similar dates. About 15,000 tons were quoted for shipment from Ulsan to Mumbai this month as well. A 5,000-ton lot was expected to be shipped from Singapore to Mumbai or Hamriyah, United Arab Emirates, at the end of March. A 2,000-ton parcel was mentioned for shipment from Malacca, Malaysia, to Mumbai this month.
Southeast Asian suppliers have also concluded a string of deals, with a 2,000-ton cargo discussed for shipment from Rayong, Thailand, to Taichung, Taiwan, at the end of March or early April. A 3,000-ton lot was also mentioned for shipment from Rayong to Chittagong, Bangladesh, in the first half of April, with a similar cargo also discussed for shipment from Sri Racha, Thailand, to Chittagong in mid-March. Availability of Group I grades was still deemed tight given recent plant turnarounds in Southeast Asia, but other grades were more readily accessible.
Steady buying interest and tightening base stock availability supported the current price structure in Asia, yielding generally stable prices, although an ex-tank price range saw small upward adjustments on snug supplies and higher buying and selling ideas. The price ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.
Ex-tank Singapore prices were mostly unchanged from the previous week, with the exception of the Group II 500 neutral.
Spot prices for the Group I solvent neutral 150 grade were steady at $920/t-$950/t, and the SN500 was heard at $1,030/t-$1,070/t. Bright stock was holding at $1,290/t-$1,330/t, all ex-tank Singapore.
Prices for the Group II 150 neutral were stable at $970/t-$1,010/t, but those for the 500N climbed by $20/t to $1,020/t-$1,070/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $790/t-$830/t, and the SN500 at $840/t-$880/t. Bright stock prices were hovering at $1,070/t-1,110/t, FOB Asia.
The Group II 150N was hovering at $840/t-$880/t FOB Asia, and the 500N and 600N cuts were mentioned at $860/t-$890/t, FOB Asia.
In the Group III segment, prices were stable as well. The 4 centiStoke was assessed at $1,520-$1,560/t, and the 6 cSt was holding at $1,490/t-$1,530/t. The 8 cSt grade was heard at $1,210-$1,250/t, FOB Asia, for fully approved product.
Upstream, crude oil futures slipped on Thursday after rising the previous session given reignited concerns about rising U.S. crude inventories and more rate hikes in Europe, which could potentially harm growth. Futures had climbed about 1% on Wednesday on emerging signs of an economic rebound in China.
On March 2, Brent May futures were trading at $84.61 per barrel on the London-based ICE Futures Europe exchange, from $80.88/bbl for April futures on Feb. 23.
Dubai front month crude oil (Platts) financial futures for April settled at $81.23 per barrel on the CME on March 1, compared to $78.38/bbl for March futures on Feb. 22.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.
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