Crude oil values remained volatile, with futures jumping one day and falling the next swayed by global economic concerns and geopolitical tensions. Base oil producers reiterated that crude prices were not typically reflected in base oil values immediately, and that some formula-based prices would only be revised on a monthly basis. Nevertheless, participants kept a close eye on crude futures as these might impact base oil market sentiment in coming weeks.

One of the elements that has been a more impactful factor, however, was the price of diesel, as this played an important role in terms of refinery operations and whether feedstocks would be streamed into fuel production or base oils output. Diesel prices have come off of their steep levels earlier this year, and producers have been favoring base oil production given attractive margins. This has led to ample supply of some grades, particularly in the API Group I segment, which has placed downward pressure on pricing.

On the other hand, upcoming planned turnarounds at a number of base oil facilities in Asia may result in tighter supplies and upward price pressure in May and June.

In Southeast Asia, an Indonesian plant that suffered some damage during a fire in early April was expected to be restarted by the end of the month. A large facility in Singapore was scheduled for maintenance of some of its base oil trains from the end of April for approximately two months. These shutdowns were expected to squeeze spot availability in the region.

In China, a few plants had been running at reduced rates since earlier in the year due to market economics and tax inspections. Some of these units have raised run rates, but some have not, with at least two units also scheduled to complete maintenance work this month. Base oil requirements appeared to be met by domestic availability, with lackluster interest for imports noted.

Suppliers have also been less eager to ship product to China given lower price expectations from Chinese buyers, who counted on a seasonal slowdown in demand to start in May, reducing the need for additional purchases. Nevertheless, there was talk about a number of cargoes being considered for shipment from South Korea to China this week, with a 2,700-metric ton lot made up of six grades expected to be lifted in Onsan for Zhangjiagang and Jingjiang in mid May and a 3,300-ton cargo of three grades moving from Onsan to Huizhou in mid May as well. A 4,000-ton parcel was also discussed for shipment from Ulsan to Zhuhai in early May.

In South Korea, a Group II/III producer was anticipated to take its plant off line for maintenance in June. This might lead to fewer spot volumes being offered by South Korean producers. For the time being, it appeared that suppliers continued to have sufficient base oils to meet both contract requirements, as well as spot business, with no shortages noted.

A 2,200-ton cargo made up of two grades was being discussed for shipment from Yeosu to Haiphong, Vietnam, in early June. About 5,700 tons were on the table for lifting in Yeosu and delivery in Dong Nai, Vietnam, Singapore and Port Klang, Malaysia, in late May. A 1,800-ton parcel was quoted for shipment from Onsan to Bangkok, Thailand, in late May as well. A 2,000-ton lot of two grades was expected to be shipped from Onsan to Taichung, Taiwan, in late May.

A Japanese refinery was also expected to start a two-month turnaround in May, which was likely to partly affect base oil output and limit availability from the producer.

In India, buyers continued to rely on domestic supplies and counted on additional base oils to become available once shipments from the United States reached Indian shores. A couple of cargoes were anticipated to be delivered in May and others in June. Details of a 16,000-metric ton lot for shipment from Houston, U.S., to Mumbai in the first week of May emerged this week. There was also mention of a 3,000-ton cargo for shipment from Rayong, Thailand, to West Coast India and/or the United Arab Emirates in late May.

This was welcome news as a domestic producer’s plant in India has been experiencing production issues. Group I supplies were snug and Group II availability has tightened as some blenders preferred to use these grades instead of Group I cuts whenever possible, given that prices were comparable, but Group II offers were heard to have climbed by about $20 per metric ton week on week.

Regular cargoes from the Middle East and South Korea were scheduled to arrive as well, although spot availability from South Korea may tighten on account of a plant turnaround and suppliers seeking higher prices.

There were expectations of plentiful Group III supplies from a Middle East producer available for export to India in the coming weeks.

Spot base oil prices in Asia were mostly stable, although ex-tank Singapore prices for Group I bright stock and the Group III 8 cSt cut edged down due to surplus availability. The Group II 150N inched up on higher offers for South Korean base stocks. 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 softer from the previous week. Spot prices for the Group I solvent neutral 150 grade were unchanged at $920/t-$950/t, and the SN500 was hovering at $1,030/t-$1,070/t. Bright stock was lower by $10/t at $1,260/t-$1,300/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed at $1,010/t-$1,050/t, and the 500N at $1,040/t-$1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed within a $770/t-$810/t range, and the SN500 was steady at $870/t-$910/t. Bright stock prices were holding at $1,010/t-1,050/t, FOB Asia.

The Group II 150N was higher by $20/t at $890/t-$930/t FOB Asia, and the 500N and 600N cuts were heard at $930/t-$970/t, FOB Asia.

In the Group III segment, prices were steady to softer from the previous week. The 4 cSt was steady at $1,520-$1,560/t, while the 6 cSt was assessed at $1,490/t-$1,530/t. The 8 cSt grade fell by $20/t to $1,150-1,190/t, FOB Asia, for fully approved product.

Upstream, crude oil futures were trading higher on Thursday morning following two sessions of significant losses. Concerns about economic growth in the U.S. and a potential drop in crude oil demand from the world’s largest consumer were partly outweighed by reports of a huge decline in U.S. crude inventories.

On April 27, Brent June futures were trading at $78.03 per barrel on the London-based ICE Futures Europe exchange, from $81.77/bbl on April 20.

Dubai front month crude oil (Platts) financial futures for May settled at $76.74 per barrel on the CME on April 26, compared to $82.37/bbl for April futures on April 19.

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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