Lubricant consumption in China has increased on the back of the complete reversal of stringent COVID policies and increased mobility of the population, foreign travel, services and manufacturing rates. These conditions have led to improved demand for base oils, particularly the heavy grades, which are chronically short in China given that lighter grades are favored at base oil plants. While demand has been increasingly satisfied through domestic base stock output, there are still segments that show deficits and importers try to fill those gaps by bringing in regional supplies.

A number of domestic plants in China were scheduled to start turnarounds in the next few weeks, which has also prompted importers to look for product elsewhere.

A few South Korean cargoes were under discussion, with a 1,000-metric ton cargo lined up for shipment from Onsan, South Korea, to Nantong in mid-March. A 1,700-ton parcel was on the table for lifting in Onsan to Jingjiang in the second half of March.

Several suppliers have also been actively offering cargoes to Southeast Asian buyers. Demand in Thailand, Indonesia and Japan has increased for passenger car motor oil and local output was not deemed adequate to meet requirements.

There were several shipping inquiries mentioned that involved South Korean product, including a 1,200-ton cargo for shipment from Ulsan to Koh Sichang, Thailand, in early April, with a second similar cargo also discussed for mid-April lifting. A 9,400-ton lot was expected to be shipped from Ulsan and Daesan, South Korea, to Singapore and/or Port Klang, Malaysia, and Merak, Indonesia, in mid-April. A 1,500-ton parcel was on the table for shipment from Yeosu to Haiphong, Vietnam, at the end of March.

Supply of most grades has tightened, but there were some cuts – such as the Group III 6 centiStoke and 8 cSt – that were deemed more plentiful than others. Demand for these grades has also weakened in countries such as the United States, which typically absorbs large amounts of Group III grades from Asia. Lengthening supplies in that country meant that demand for Asian cargoes may see some softening, leading suppliers to look for alternative outlets.

In India, there has been heightened buying interest in base oils as lubricant consumption was expected to take off given increased manufacturing output and demand from the automotive and motorcycle segments. Optimistic data showing robust growth of the Indian economy so far in 2023 supported these market expectations.

Buyers continued to rely heavily on domestic production and suppliers were heard to have increased prices. There has also been keen appetite for imports as local supply was not deemed sufficient to cover all requirements, despite the fact that a domestic producer was expected to restart production at its Group I and Group II plant this week, following a month-long turnaround.

Around 7,000 tons of base oils and other chemicals were expected to be shipped from Singapore to Chennai, Ennore and Kolkata in early April. A 1,500-ton parcel was also discussed for shipment from Ulsan to Mumbai and Jawaharlal Nehru Port Trust at the end of March or early April. About 15,000 tons were likely to be shipped from Daesan and Pyongtaek, South Korea, to West Coast India in late March. Approximately 3,200 tons were also slated to move from Ulsan to Mumbai and JNPT at the end of March or early April. A 5,000-ton cargo was also in discussions to cover Daesan and Yeosu to Chennai in the second half of March.

A tightening supply and demand ratio lent stability to base oil prices in Asia, with only a couple of ranges undergoing small upward adjustments on climbing 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.

Spot prices for the Group I solvent neutral 150 grade were steady at $920/t-$950/t, and the SN500 was hovering 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, and the 500N remained at $1,020/t-$1,070/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $790/t-$830/t, and the SN500 at $840/t-$880/t. Bright stock prices were firm at $1,070/t-1,110/t, FOB Asia.

The Group II 150N edged up by $20/t to $860/t-$900/t FOB Asia, and the 500N and 600N cuts also climbed by $20/t to $880/t-$910/t, FOB Asia.

In the Group III segment, prices were stable. The 4 cSt was assessed at $1,520-$1,560/t, while the 6 cSt was unchanged at $1,490/t-$1,530/t. The 8 cSt grade was holding at $1,210-1,250/t, FOB Asia, for fully approved product.

Upstream, crude oil futures reversed course on Thursday after a two-day decline prompted by fears over the economic impact of higher interest rates. The downward trend was halted by fuel supply disruptions in France due to a strike over pension reforms, a drop in U.S. crude inventories, and a weaker dollar.

On March 9, Brent May futures were trading at $83.50 per barrel on the London-based ICE Futures Europe exchange, from $84.61/bbl on March 2.

Dubai front month crude oil (Platts) financial futures for April settled at $80.42 per barrel on the CME on March 8, compared to $81.23/bbl on March 1.

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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