Base oils demand seemed to have reached a plateau, with many buyers holding off on acquiring additional volumes as fundamentals appeared muddled. Steeper crude oil and feedstock prices reversed some of the downward pressure that lackluster demand in some countries such as China had placed on spot base oil values. Upcoming plant turnarounds in Asia and the prospects of tightening supply were also supporting prices and may prompt buyers to secure products in the coming days.
While buying interest for imports in the key market China was disappointing, there are brighter spots such as Southeast Asia and India, where demand has picked up. Several cargoes were heard concluded from source countries such as Singapore and Thailand into neighboring nations. It is not clear why Chinese demand for imports has subsided; some observers blame a weaker-than-expected economic recovery, following the sudden abandoning of COVID-19 restrictions and an accompanying surge in infections late last year. These developments had led to reduced demand from downstream segments such as industrial and marine lubricants. General economic uncertainties and inflation were also dampening consumer sentiment around the world, possibly leading to reduced interest in Chinese manufactured goods.
Others attributed the lower buying interest for base oil imports in China to growing domestic supplies. Several new plants started operations in 2019 and many were running at top rates, while a new API Group II and Group III plant was heard to have achieved specifications in January. However, a number of plants were also operating at reduced rates and remained shut down to avoid oversupply conditions.
The sole Taiwanese Group II producer shipped large quantities to China in March, but requirements appeared to have declined and the supplier has been entertaining opportunities in other countries.
South Korean producers have recently concluded business into Southeast Asia and more faraway destinations in the Americas, and less business into China. There were also expectations that South Korean base stocks would become less readily available given upcoming turnarounds. A South Korean Group II and Group III producer plans to take its base oils unit down for maintenance for approximately 45 days in mid-May and was expected to be building inventories to cover requirements during the outage.
Activity in Southeast Asia was also brisk, with several cargoes expected to move within the region and beyond. Buying interest for Group I cargoes remained robust, with a number of cargoes on offer and prices said to be firm, although there was downward pressure on bright stock as demand for this grade started to weaken. Appetite for other Group I grades remained strong in places like India, particularly as imports from Iran have been unavailable. A 1,000-ton to 3,000-ton cargo was quoted for prompt shipment from Rayong or Sri Racha, Thailand, to Mundra, India. A 2,000-ton parcel was on the table for lifting in Sri Racha to West Coast India in mid-April and a second 1,500-ton lot for shipment from Sri Racha to Chennai or Chittagong, Bangladesh, between April 10 and April 20.
Base oil demand has strengthened in India over the last two weeks, with renewed interest seen on imports from other parts of Asia, the Middle East, Europe and the U.S. The arrival of imports has provided buyers with more breathing room and allowed them to be more selective about price levels, as price pressure on the light grades has grown, while the heavier grades showed steadier pricing.
Substantial volumes of U.S. product were anticipated to reach Indian shores in the next few weeks at a time when offers from regular suppliers such as South Korea may be more limited given planned maintenance in that country. An Indian producer was also expected to start a turnaround this month.
Approximately 4,000 tons were discussed for prompt shipment from Yanbu, Saudi Arabia, to Mumbai. A second parcel of around 6,000 tons was mentioned for shipment from Yanbu and Jeddah, Saudi Arabia, to Ras Al Khaimah, United Arab Emirates, and Mumbai between now and the end of April. About 5,000 tons were expected to be lifted in Singapore for shipment to Ennore, Chennai and Kolkata in India, and Chittagong in Bangladesh at the end of April or early May. A 2,000-ton lot was mentioned for shipment from Pyongtaek, South Korea, to Chennai in late April. About 10,000 tons were quoted for shipment from Daesan, South Korea, to Mumbai in early May.
Spot base oil prices in Asia were again mixed this week, with some grades undergoing moderate upward adjustments on tighter conditions, and others succumbing to downward pressure due to weaker demand and growing supply. 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 steady-to-firm compared to values the previous week. Spot prices for the Group I solvent neutral 150 grade were assessed at $920/t-$950/t, and the SN500 at $1,030/t-$1,070/t. Bright stock was holding at $1,280/t-$1,320/t, all ex-tank Singapore.
Prices for the Group II 150 neutral moved up by $20/t to $1,010/t-$1,050/t, but the 500N was unchanged at $1,040/t-$1,090/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 edged down by $20/t to $770/t-$810/t, but the SN500 was holding at $870/t-$910/t. Bright stock prices were adjusted down by $20/t to $1,040/t-1,080/t, FOB Asia.
The Group II 150N was higher by $10/t at $870/t-$910/t FOB Asia, and the 500N and 600N cuts also moved up by $10/t to $930/t-$970/t, FOB Asia.
In the Group III segment, prices were stable to soft. The 4 cSt was unchanged at $1,520-$1,560/t, while the 6 cSt was holding at $1,490/t-$1,530/t, but the 8 cSt grade was down by $20/t to $1,170-1,210/t, FOB Asia, for fully approved product.
Upstream, crude oil futures fell on Thursday after climbing steadily in previous trading sessions on news that OPEC+ would be curbing production by more than a million barrels per day, starting in May, along with reports of a drop in U.S. oil inventories. Futures slipped later in the week as economic data raised concerns about a potential global recession, which, in turn, could result in reduced crude oil demand.
On April 6, Brent June futures were trading at $84.44 per barrel on the London-based ICE Futures Europe exchange, from $78.78/bbl for May futures on March 30.
Dubai front month crude oil (Platts) financial futures for May settled at $83.82 per barrel on the CME on April 5, compared to $76.77/bbl for April futures on March 29.
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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