Asia Base Oil Price Report

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Steady demand against adequate inventories continued to support prices in Asia. Despite some markets showing less vigorous conditions than others, upcoming turnarounds in the region were expected to keep supplies balanced-to-tight against consumption levels. In some countries, local holidays kept activity slightly subdued during the week, but trading was likely to pick up as participants were eager to negotiate May shipments.

Participants also monitored crude oil and feedstock prices closely, given that values remained very volatile. Crude oil futures fell by 4% on Wednesday, extending steep losses from the previous session after the United States Federal Reserve raised interest rates, deepening concerns about the country’s growth rate and its impact on the global economy. On Wednesday, May 3, Brent futures settled at $72.33 per barrel, the global benchmark’s lowest close since December 2021, according to Reuters.

On May 4, Brent July futures were trading at $73.15 per barrel on the London-based ICE Futures Europe exchange, from $78.03/bbl for June futures on April 27.

Dubai front month crude oil (Platts) financial futures for June settled at $71.13 per barrel on the CME on May 3, compared to $76.74/bbl on April 19.

Some of the same factors that influenced crude oil prices were also impacting the base oils and lubricants markets, as economic uncertainties and concerns about a global recession were on participants’ minds. While travel and mobility has increased significantly, following three years of restraints brought on by the COVID-19 pandemic, consumers remained cautious in many countries because of growing inflation and rising interest rates. This was expected to affect not only automotive applications, but the industrial, marine and construction segments as well.

There had also been expectations that the Chinese economy would recover strongly after the lifting of the strict government zero-COVID policies, but current economic indicators are wavering, with industrial production less robust than expected, according to reports released over the weekend. Nevertheless, this week, millions of Chinese travelers swarmed train stations and tourist spots during the five-day Labor Day holiday which is celebrated on May 1. This was seen as an optimistic sign that the country’s pandemic crisis was over and consumer-led economic rebound was taking place despite the fact that manufacturing activity has contracted.

“The travel splurge underlines how domestic consumers are in the driver’s seat of China’s economic recovery. Official survey data released Sunday showed Chinese factory activity unexpectedly shrank last month, a victim of faltering global spending as consumers and businesses in the U.S., Europe and Asia confront high and rising interest rates, persistent inflation and pockets of weakness in the financial system,” the Wall Street Journal reported.

These conditions have also had some impact on base oil and lubricants demand, with fewer imports making their way to China than previously expected. Chinese base oil consumption appeared to be adequately covered by domestic production, and there have even been some surplus cargoes for export. A 3,800-metric ton cargo, for example, was discussed for shipment from Nantong to Mumbai in mid-May. A number of small cargoes were also in discussion for shipment to China, with 1,500-ton parcel made up of two grades expected to be shipped from Malacca, Malaysia, to Zhuhai in the first half of May. A 2,000-ton cargo was mentioned for shipment from Yeosu, South Korea, to Nansha in late May.

A few plants in China continued to run at reduced rates due to market dynamics and inspections, and while some facilities have increased operating rates, at least two units have also been shut down for maintenance. Chinese base oil demand was also expected to decline in the coming weeks due to the end of the spring season.

On the other hand, demand in other Asian countries was picking up, particularly in those nations that recently observed the holy month of Ramadan, when activity had been more subdued. 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, planned and unplanned production outages have resulted in reduced availability of certain grades, particularly within the API Group I segment. An Indonesian plant was expected to have been restarted following a fire in early April. 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. Southeast Asian buyers were on the lookout for regional cargoes, with a 2,200-ton lot being considered for shipment from Yeosu, South Korea, to Haiphong, Vietnam, in early June. About 2,000 tons were earmarked for shipment from Sri Racha, Thailand, to Singapore in the first half of May.

In Northeast Asia, a South Korean Group II/Group III producer was slated to start an extended turnaround in late May, and spot supply was expected to be curbed as a result. A Japanese refiner was also expected to start a two-month turnaround at its refinery in May, which was likely to partly affect base oil output and limit availability from the producer.

Meanwhile, in India, buying appetite appeared to have subsided as uncertainties dampened business. The base oil price direction was not clear as wavering currency exchange rates made imports more expensive, and crude oil prices were volatile too. However, the arrival of large United States cargoes was also offering some comfort that there would not be any supply shortages at a time when a domestic producer’s plant was facing some production issues.

Group I supplies were snug, and Group II availability has tightened as Northeast Asian Group II suppliers have been focusing on other markets where prices were more attractive. Group II and Group III spot supplies from South Korea were strained on account of a plant turnaround starting at the end of May and steady demand in other markets, but the lower availability may be offset by increased volumes from the Middle East and the U.S., where domestic demand has been lackluster. About 18,000 tons were heard to have shipped from Yanbu, Saudi Arabia, to Mumbai in late April. There was also talk about Spanish product making its way to India, with 17,000 tons ostensibly shipped from Cartagena, Spain, to Mumbai in late April.

Group II prices have inched up by about $10 per metric ton in India on account of higher offers and more limited regional availability. Despite a tightening supply scenario, several South Korean cargoes were discussed for shipment to India this week. About 5,000 tons to 7,000 tons were expected to be shipped from Yeosu to Mumbai at the end of May or early June. A 5,000-ton parcel was on the table for shipment from Pyongtaek and/or Yeosu to Chennai in the second half of May. About 3,000 tons were quoted for prompt lifting in Ulsan to Mumbai. A 3,000-ton lot was also mentioned for prompt shipment from Yeosu or Ulsan to Chennai. Additionally, 10,000 tons of base oils and hexane were being discussed for shipment from Singapore to Mumbai and two ports in the Middle East in late May.

Spot base oil prices in Asia were mostly stable, although a couple of grades saw upward adjustments and the Group III 8 cSt cut remained under pressure due to surplus availability. 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 unchanged at $920/t-$950/t, and the SN500 was heard at $1,030/t-$1,070/t. Bright stock was hovering 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 stable within a $770/t-$810/t range, and the SN500 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 $910/t-$950/t FOB Asia, and the 500N and 600N cuts edged up by $10/t to $940/t-$980/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 centiStoke was assessed at $1,490/t-$1,530/t. The 8 cSt grade fell again by $20/t to $1,130-1,170/t, FOB Asia, for fully approved product.

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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

Historic and current base oil pricing data are available for purchase in Excel format.

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