Asia Base Oil Price Report

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Many buyers in Asia adopted a wait-and-see attitude at the first signs that spot prices were starting to come down, and this has exacerbated the seasonal slowdown that had begun in late May. At the same time, plant turnarounds and reduced supplies at traditional origins were counterbalancing the softer demand levels. Participants were also keeping an eye on volatile crude oil and feedstock values as these may impact base oil-related decisions in the coming weeks.

Crude futures jumped by about 3% to a one-week high on Thursday on a weaker United States dollar and data that showed a spike in refinery runs in top crude importer China.

Oil prices had fallen by 1.5% on Wednesday after the U.S. Federal Reserve projected more interest rate hikes this year, raising concerns about global demand shortly after government data had shown an unexpected, large build in U.S. crude oil stocks. Futures had risen by more than 3% the previous day on expectations of rising fuel demand following China’s central bank’s decrease of a short-term lending rate.

China has been one of the countries benefitting from imports of heavily discounted Russian oil, which is subject to European Union and U.S. export sanctions due to Russia’s war on Ukraine. Pakistan was added to the list of countries importing Russian oil this week, as the first cargo of discounted Russian crude oil arranged under a deal struck between Islamabad and Moscow arrived in Karachi on Sunday, Reuters reported.

This week also, increased trading interest in Dubai oil has lifted its premium to West Texas Intermediate crude to its highest since late March, as more traders have turned to Dubai after producers such as Saudi Arabia increased prices and shipping rates also climbed, OilPrice.com reported. According to Bloomberg, Dubai swaps were trading at a premium of $3.65 a barrel above the U.S. benchmark West Texas Intermediate futures in Singapore on Wednesday, with the spread usually smaller than $3.

On June 15, Brent Augustfutures were trading at $75.67 per barrel on the London-based ICE Futures Europe exchange, from $75.51/bbl on June 8.

Dubai front month crude oil (Platts) financial futures for July settled at $72.54 per barrel on the CME on June 14, from $75.90/bbl on June 7.

Base oil buyers have either taken a step back from trading and waited for further price decreases or secured only small spot cargoes in order to avoid holding pricey stocks as values continued to edge lower. This trend resulted in reduced regional demand and mounting inventories at producer’s sites.

At the same time, as reported in the last few weeks, a fairly busy base oil plant turnaround schedule over the next few months might curtail availability of certain grades, although lackluster demand in other regions may free up additional material that would otherwise be exported from Asia.

In Southeast Asia, recent maintenance and unplanned outages at a couple of Indonesian plants have led to reduced offers of API Group I base stocks, but a Thai producer was heard to have offered heavy grades and bright stock via a tender.

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 Northeast Asia, 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. A second Japanese producer started a turnaround in April and was expected to complete it this month, reducing Group II output.

A South Korean API Group II and Group III producer has scheduled an extended turnaround which started in late May and will last until July.

A second South Korean producer has scheduled a month-long turnaround beginning in mid-August and was heard to have limited its spot shipments to build inventories and cover requirements during the outage.

Most South Korean suppliers appeared to have sufficient inventories to complete shipments within and outside the region. A 1,500-metric ton parcel was expected to be shipped from Onsan to Merak, Indonesia, in late June. A second 1,500-ton lot made up of two grades was discussed for shipment from Yeosu to Ho Chi Minh, Vietnam, in late June to early July. A 1,200-ton cargo of three grades was quoted for shipment from Yeosu to Port Klang, Malaysia, in the second half of July. A 1,300-ton lot was expected to be shipped from Yeosu to Jakarta, Indonesia, in mid-July. A 1,100-ton parcel was on the table for lifting in Yeosu to Yokohama, Japan, in late August. There was also mention of a 1,500-ton lot for shipment from Mizushima, Japan, to Ulsan at the end of June.

In the key market China, a large refiner’s Group I and Group II plant was heard to be partially shut down, but other facilities in China were running well, which led to lengthening supplies of domestic product. As a result, buying interest in imports has weakened, with fewer discussions taking place. A 2,000-metric ton lot was discussed for shipment from Rayong, Thailand, to Nantong at the end of July, possibly involving Group I material, but further negotiations were not mentioned.

Volumes imported into China from Taiwan, for example, were expected to be lower than in previous months. The sole Taiwanese Group II producer, Formosa Petrochemical, typically exports large quantities of base oils to China, but volumes were heard to have declined this month, although shipments to other destinations such as India continued unabated. Additionally, the producer was anticipated to start building inventories ahead of a turnaround in October.

The Chinese economic recovery following contracted growth due to strict zero-COVID restrictions and lockdowns in the previous three years has been less robust than anticipated. This situation was also reflected in more subdued conditions than expected in the fuels and lubricants segments, partly because activity in the automotive segment was less vibrant than predicted, although fuel demand did see a strong rise in April. The changing conditions were attributed to some extent to significant changes in the composition of the car parc in China, as vehicle electrification rates continued to grow.

In another key market, India, a coalescence of factors, including the start of the monsoon season – which spans from June until September – the expected arrival of numerous imports, and steep freight rates had a dampening effect on fresh import demand. The heavy monsoon rains and potential flooding tend to disrupt transportation and hamper industrial activity, not only in India, but several Southeast Asian countries as well.

Buyers either relied heavily on domestic supplies, or sought imports to complement their stocks, but buying indications have softened as consumers were aware that there was plentiful availability of product at present – particularly of the light-viscosity grades – and more cargoes were on their way. Several large parcels were shipped from the U.S. for arrival in July and August. This material was expected to be placed in India or move on to outlets in the Middle East. It was unclear whether there would be further availability in the U.S. as a key Group II facility on the U.S. Gulf was undergoing a turnaround and another unit was suffering unplanned production issues. There were also Group I cargoes expected to arrive from Southeast Asia, while regular shipments from South Korea, Taiwan and the Middle East were anticipated to continue.

Recent transactions included a 3,000-ton lot expected to be shipped from Rayong, Thailand, to West Coast India at the end of June. Over 18,000 tons were mentioned for lifting in Ras Laffan, Qatar, to West Coast India in mid to late June. About 19,000 tons were discussed for shipment from South Korea to West Coast India in the second half of June. A 5,000-ton cargo was expected to be shipped from Ulsan, South Korea, to Mumbai in mid-June. Between 9,000 tons and 11,000 tons made up of four grades were earmarked for shipment from Mailiao, Taiwan, to Mumbai in the second half of July.

Spot base oil price assessments in Asia were steady-to-soft this week, with buying and selling indications for some grades being exposed to downward pressure due to 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 assessed down by $20/t at $890/t-$920/t, but the SN500 was unchanged at $1,010/t-$1,050/t. Bright stock slipped by $10/t to $1,240/t-$1,280/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were hovering at $990/t-$1,030/t, and the 500N was lower by $10/t at the high end of the range at $1,030/t-$1,070/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $700/t-$740/t, and the SN500 was also steady at $840/t-$880/t. Bright stock prices were hovering at $960/t-1,000/t, FOB Asia.

The Group II 150N was lower by $10/t at $850/t-$890/t FOB Asia, and the 500N and 600N cuts also edged down by $10/t to $900/t-$940/t, FOB Asia.

In the Group III segment, prices were steady from the previous week. The 4 centiStoke was assessed at $1,510-$1,540/t, and the 6 cSt at $1,480/t-$1,520/t. The 8 cSt grade was unchanged 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.

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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