While suppliers would like to see a significant increase in demand, they appeared fairly content with the fact that consumption levels have been healthy in most countries and prices have remained stable. Steeper crude oil prices have started to place pressure on base oil values, but producers acknowledged that changes in feedstock prices are not typically reflected overnight. Nevertheless, prospects of higher base oil prices drove buyers eager to meet the potential price hikes to the spot market this week, while contract customers have upped the volumes they expect to receive in coming weeks.
The more muted activity in the key market China observed over the last few weeks has been offset by keen buying interest in other countries, particularly in Southeast Asia, despite the observance of Ramadan from March 22 until April 20 in several of these nations.
With the number of API Group I base oil producers diminishing over the years, it was not surprising to see robust appetite for Group I cargoes from Singapore, Thailand, and Indonesia. Shipments from an Indonesian producer may be curtailed following an explosion and fire at one of its facilities earlier this month, but further details were not forthcoming. There were also expectations that availability from Singapore would be reduced as a key refiner will be starting a two-month turnaround in late April.
Many Group I consumers have tried to switch to Group II base oils when downstream applications allowed it, as prices have been competitive with Group I values and global Group II supplies have grown. Supplies of Group I bright stock have lengthened due to seasonal trends, leading to lower bids and offers this week.
A Thai producer was pursuing export opportunities for May, with a 2,000-metric ton cargo expected to be lifted from Sri Racha, Thailand, to Taichung, Taiwan, in the first half of May. A 2,000-ton lot was mentioned for shipment from Sri Racha to Mundra, India, in May as well.
South Korean suppliers have been busy concluding business into various destinations in Southeast Asia and spot availability has tightened. Added to this was the expectation that a turnaround at a South Korean facility in the second quarter would further strain supplies in the region.
There has been increased interest in Group III base stocks in Southeast Asia, with a few South Korean cargoes sold to Vietnam and Indonesia. Around 500 tons were mentioned for prompt shipment from Onsan to Ciwandan, Indonesia. A 1,200-ton cargo was expected to be shipped from Onsan to Bangkok, Thailand, the first week of May. Around 1,000 tons were also quoted from Onsan to Ho Chi Minh, Vietnam, in mid-May. A 1,700-ton parcel was mentioned for shipment from Onsan to Godau, Vietnam, at the end of April. About 1,100 tons were expected to be shipped from Yeosu to Yokohama, Japan, in early June. A 4,000-ton lot was likely to be shipped from Yeosu to Koh Sichang, Thailand, around May 5-10.
Demand for all grades was deemed stronger in India than in early March. This was partly attributed by buyer efforts to beat potentially higher base oil prices in coming weeks as crude oil and feedstock prices have strengthened. However, domestic production of base stocks was somewhat insulated from these price hikes as India is able to import Russian crude oil at a steep discount. This allowed domestic producers to maintain competitive prices.
A number of base oil cargoes were due to arrive in India in the coming weeks, including three cargoes from the United States, and several from South Korea, the Middle East and Southeast Asia. This week, discussions centered on a 16,000-metric ton cargo to be shipped from Houston, United States, to Mumbai in early May. A 2,000-ton cargo was mentioned for lifting in Sri Racha to West Coast India in mid-April. A 1,700-ton lot was quoted for shipment from Malacca, Malaysia, to Mumbai at the end of April. Over 5,000 tons were on the table for shipment from Singapore to Ennore, Chennai, Kolkata and Chittagong, Bangladesh, at the end of April to the first days of May. About 8,000 tons were expected to be shipped from Ruwais, United Arab Emirates, to West Coast India in late April.
Activity in China had been subdued, with most of the country’s requirements being fulfilled by domestic base oils. The economic recovery following the pandemic has been spotty, with some sectors doing better than others. In terms of base oils, there were signs that interest for imports has started to emerge, with a few fresh cargoes being discussed this week. Imports still faced difficulties in competing with domestic prices, which were hovering at lower levels due to ample availability. A 1,000-ton lot was on the table for lifting in Onsan to Tianjin on April 21-24. A second cargo of about 1,500 tons made up of two grades was mentioned for lifting in Onsan to Tianjin in mid-May. A 3,300-ton cargo was discussed for shipment from Singapore to Zhenjiang in mid-April. Another cargo, this time of 1,350 tons made up of three grades, was being considered for loading in Onsan for Zhenjiang at the end of May.
Spot base oil prices in Asia were mostly stable, with FOB Asia prices for Group I bright stock seeing a small downward adjustment due to 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 from 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 was hovering at $1,010/t-$1,050/t, and the 500N was unchanged at $1,040/t-$1,090/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed at $770/t-$810/t, and the SN500 was holding at $870/t-$910/t. Bright stock prices were adjusted down by $20/t to $1,020/t-1,060/t, FOB Asia, given slowing demand and plentiful supply.
The Group II 150N was stable at $870/t-$910/t FOB Asia, and the 500N and 600N cuts at $930/t-$970/t, FOB Asia.
In the Group III segment, prices were holding from the previous week. The 4 cSt was unchanged at $1,520-$1,560/t, while the 6 cSt was at $1,490/t-$1,530/t. The 8 cSt grade was heard near $1,170-1,210/t, FOB Asia, for fully approved product.
Upstream, crude oil futures showed little fluctuation on Thursday as analysts evaluated the risks of a potential recession in the U.S. – the world’s largest oil consumer – given news of a cooling U.S. inflation rate. The possibility of increased oil demand and a tightening of global supplies offered price support. Both Brent and West Texas Intermediate futures had risen 2% on Wednesday to their highest levels in more than a month.
On April 13, Brent June futures were trading at $87.09 per barrel on the London-based ICE Futures Europe exchange, from $84.44/bbl on April 6.
Dubai front month crude oil (Platts) financial futures for May settled at $86.45 per barrel on the CME on April 12, compared to $83.82/bbl for April futures on April 5.
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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