Crude futures settled lower on Thursday, but partially recovered from earlier losses of about $3/bbl after the United States and Iran both denied a report that they were close to reaching a nuclear deal which would lift sanctions on Iranian oil exports. Oil prices had climbed earlier in the week, boosted by expectations of further output cuts by OPEC+ members.

On June 8, Brent Augustfutures were trading at $75.51 per barrel on the London-based ICE Futures Europe exchange, from $72.87/bbl on June 1.

Dubai front month crude oil (Platts) financial futures for July settled at $75.90 per barrel on the CME on June 7, from $70.77/bbl on May 31.

Aside from keeping an eye on crude oil and feedstock prices, market participants were monitoring supply conditions because slowing demand was expected to result in additional volumes becoming available, but planned turnarounds could also curtail some of this availability.

In Southeast Asia – a major source of API Group I material – recent maintenance and unplanned outages at a couple of Indonesian plants have led to reduced availability of Group I base stocks. Additionally, a key facility in Singapore was undergoing maintenance of some of its base oil trains from the end of April until early June, impacting mostly Group II supply. However, the producer was expected to resume full operations this month. In regional shipments, it was heard that a 2,000-metric ton cargo was being discussed for shipment from Malacca, Malaysia, to Map Tha Phut, Thailand, in late June or early July.

In Northeast Asia, a South Korean Group II and Group III producer scheduled an extended turnaround, which started in late May and will last until July. This has limited spot shipments to regular outlets in Europe and the Americas.

Despite reduced supply from the producer, there were still a number of cargoes discussed for export from South Korea this week. A 2,000-metric ton parcel was mentioned for shipment from Onsan to Merak and Ciwandan, Indonesia, in late June. About 3,700 tons were expected to be shipped from Ulsan and/or Yeosu to Batangas and Manila, Philippines, in early July. Between 8,500 tons and 9,500 tons were being considered for shipment from Daesan and Ulsan to Singapore and Port Klang, Malaysia, the first week of July.

A Japanese refiner was reported to have started a two-month turnaround at its refinery in late May, which was likely to affect Group I base oil output and limit availability from the producer. A second Japanese producer started a turnaround in April and will wrap it up in June, affecting Group II output.

The sole Taiwanese Group II producer was expected to complete some refinery maintenance in June and July, but this was not anticipated to affect base oil output significantly. The same producer has scheduled a turnaround at its base oils plant in October and was expected to start building inventories ahead of the shutdown, limiting its spot sales. Currently, the supplier has been shipping significant amounts of base oils to China and other destinations within Asia this month.

In the key market China, a large refiner was still undergoing a partial shutdown of its Group I and Group II facilities, but this did not seem to affect domestic supplies significantly. A seasonal slowdown in demand and adequate availability of domestic products was dampening buying interest for base oils and particularly, for imported material. China typically imports substantial amounts of heavy grades, given that local plants produce larger amounts of light grades. However, the weaker demand, together with economic uncertainties and a weaker local currency against the dollar have led to reduced import movements, with consumers relying more heavily on domestic output and lowering their price expectations.

While some suppliers have resisted buyers’ pressure to reduce their offers, a few sellers acquiesced to decreases in order to place product and reduce inventories. More subdued industrial activity than expected as China recovers from the consequences of strict COVID-related restrictions has resulted in lengthening supplies of the heavy grades.

In another key market, India, the start of the monsoon season meant that buyers would be more cautious as to how much product to acquire in the coming weeks. Many have built inventories ahead of the heavy rains because the adverse weather results in transportation and logistical issues. Indian consumers were also confident that they would be able to locate sufficient base oils either from domestic producers, whose plants were expected to increase run rates following turnarounds this quarter, or from importers who have recently concluded a significant amount of business including several cargoes from the United States. Buyers’ price expectations have therefore been adjusted down.

The U.S. has been able to export several Group II cargoes as domestic demand remained unseasonably lackluster, but the recent export transactions have allowed for more balanced supply and demand conditions at home. U.S. producers have also adjusted domestic posted prices down, hoping to invigorate sales. These efforts and an ongoing turnaround at a Group II facility have helped suppliers manage mounting inventories. At least 18,000 metric tons were mentioned for shipment from the U.S. Gulf to West Coast India for lifting in the first half of June. About 4,200 tons were on the table for shipment from Ulsan, South Korea, to Mumbai and Jawaharlal Nehru Port Trust in mid-July. About 3,000 tons to 5,000 tons were quoted for shipment from Pyongtaek and Daesan, South Korea, to West Coast India in late June, with a similar cargo mentioned for earlier dates. A 3,000-ton cargo was also being discussed for shipment from Thailand to West Coast India in second half June. Several other cargoes that have been concluded in recent weeks were on their way to India as well.

Spot base oil price assessments in Asia were generally softer this week, with buying and selling indications for some grades having been adjusted down growing supply and slowing demand. 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-lower from the previous week. Spot prices for the Group I solvent neutral 150 grade were hovering at $910/t-$940/t, but the SN500 was assessed down by $10/t at $1,010/t-$1,050/t. Bright stock also slipped by $10/t to $1,250/t-$1,290/t, all ex-tank Singapore.

Prices for the Group II 150 neutral slipped by $20/t to $990/t-$1,030/t, and the 500N edged down by $10/t to $1,030/t-$1,080/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed down by $20/t at $700/t-$740/t, and the SN500 was also lower by $20/t at $840/t-$880/t. Bright stock prices moved down by $20/t as well to $960/t-1,000/t, FOB Asia.

The Group II 150N was lower by $20/t at $860/t-$900/t FOB Asia, and the 500N and 600N cuts edged down by $10/t to $910/t-$950/t, FOB Asia.

In the Group III segment, prices were softer. The 4 centiStoke slipped by $10/t to $1,510-$1,540/t, and the 6 cSt was also lower by $10/t at $1,480/t-$1,520/t. The 8 cSt grade was also assessed down by $10/t at $1,100-1,140/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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