Base oil prices were stable to soft in Asia on balanced supply and demand, and despite tightening availability of certain grades due to ongoing or imminent turnarounds, availability of some base oils has lengthened, causing prices to soften. Steeper crude oil values helped prop up prices this week, although market participants reiterated that oil price fluctuations are not typically reflected in base oil pricing right away, except on some domestic price indications.
Crude oil and feedstock prices again were somewhat erratic this week, with numbers climbing by several percentage points one day and plunging the next. Crude oil futures jumped by over 2% on Monday as recession fears began to fade on optimistic economic news such as a healthy United States job report, but fell mid-week, ending a three-day rally, as data suggested that the U.S. Federal Reserve might increase interest rates further since consumer prices rose in April.
On May 11, Brent July futures were trading at $75.26 per barrel on the London-based ICE Futures Europe exchange, from $73.15/bbl on May 4.
Dubai front month crude oil (Platts) financial futures for June settled at $75.18per barrel on the CME on May 10, compared to $71.13/bbl on May 3.
Crude oil price fluctuations aside, base oil market conditions were largely unchanged from a week ago, with demand in most countries remaining on a steady course or picking up slightly as national holidays have ended, and buyers needed to replenish stocks.
While most coronavirus pandemic-related restrictions have now been lifted– leading to increased travel and mobility of the population–there were some economic segments that have not yet fully recovered. Inflation, rising interest rates and difficulties in securing credit seemed to be having a dampening effect on business.
In China, manufacturing activity has been less robust than expected on reduced consumer demand in many countries and suppliers’ focus on clearing inventories as logistical issues have largely been resolved. The lower lubricant demand from the industrial segment, together with a seasonal slowdown in other sectors, was dampening consumption of base oils.
Despite the fact that a number of Chinese base oil plants continued to run at reduced rates or were undergoing maintenance, domestic production was deemed adequate to cover the current call for product. There were also expectations that fewer cargoes from Northeast and Southeast Asian would be making their way to China in the coming weeks, with appetite for imports said to be generally subdued. Additionally, Taiwanese cargoes, which typically feature prominently within the basket of imports to China, will likely be curbed as the sole API Group II producer was expected to start building inventories ahead of a turnaround in the third quarter. Only a 2,000-metric ton lot was mentioned for shipment from Onsan, South Korea, for delivery in Tianjin in late May this week.
In another key market, India, certain corners of the market showed healthy activity, with buyers seeking cargoes to pad inventories ahead of the monsoon season which typically causes logistical and transportation issues. At the same time, some segments have shown reduced appetite for base oils as lubricant demand generally tends to decline in the second part of the year during the rainy season, and buyers were confident that there would be sufficient product available from domestic suppliers as well as from fresh import arrivals.
A couple of large Group II cargoes originating in the U.S. have been concluded in the past couple of weeks, and some Middle Eastern parcels have also been secured. A 3,000-ton cargo was also expected to have been shipped from South Korea to Chennai the first week of May. Up to 7,000 tons were anticipated to be loaded in Yeosu to Mumbai at the end of May or early June.
A number of planned turnarounds in Southeast and Northeast Asia could potentially tilt the supply and demand balance slightly to the snug side. 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, affecting mostly Group II supply. A South Korean Group II and Group III producer has scheduled an extended turnaround in late May, and spot availability was expected to be curbed as a result. A Japanese refiner was scheduled to start a two-month turnaround at its refinery this month, which was likely to affect base oil output and limit availability from the producer.
A turnaround at a Group III facility in Europe was also expected to have an indirect impact on Asian supply, as the producer’s affiliate plant in South Korea was thought to be producing additional volumes to supplement the European market during the turnaround.
While South Korean spot supply was expected to be curtailed due to production outages, several export cargoes were under discussion during the week. A 3,500-ton parcel was quoted for prompt shipment from Ulsan to Tanjung Priok, Indonesia. A 1,000-ton cargo was on the table for shipment from Ulsan to Kaohsiung, Taiwan, in early June. About 5,000 tons were expected to have been concluded from South Korea to South America in the first week of May. About 2,000 tons made up of two grades were likely to be lifted in Yeosu to Haiphong, Vietnam, in early June.
Spot base oil price assessments in Asia were stable to softer, depending on supply and demand fundamentals, with some grades experiencing small downward price adjustments on slowing demand and falling diesel values, which compete with base oils in terms of the feedstock stream. 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 assessed down by $10/t at $760/t-$800/t as lower diesel values were exerting pressure on light viscosity grades, but 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 hovering at $910/t-$950/t FOB Asia, and the 500N and 600N cuts were unchanged at $940/t-$980/t, FOB Asia.
In the Group III segment, prices were steady to softer from the previous week. The 4 cSt was holding at $1,520-$1,560/t, while the 6 cSt was assessed at $1,490/t-$1,530/t. The 8 cSt grade edged down by $10/t to $1,120-1,160/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.
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