Asia Base Oil Price Report

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Base oil prices in Asia continued to be exposed to downward pressure due to declining demand and lengthening supply, with macroeconomic factors and volatile crude oil prices weighing on activity and pricing as well. The imminent completion of plant turnarounds and expectations that finding most base oil grades would not be a problem in coming weeks kept some blenders on the sidelines.

Buyers were under the impression that if they waited long enough, prices may fall further, and product would become available at more reasonable levels. This trend resulted in lackluster buying activity and the acquisition of smaller parcels, mostly under contract, with shrinking interest in spot cargoes. Suppliers did adjust prices down to attract business and some transactions were concluded within the region. Export business ex-Asia has turned more challenging due to falling prices in other regions and steep freight rates.

In China, the expected slowdown after the spring production cycle has wrapped up led to less vibrant buying activity. Buyers’ product needs appeared to be well-covered for the time being, and most domestic plants were running well – with the exception of a couple of units – allowing for more base stocks to enter the supply system. A Chinese refiner’s API Group I and Group II plant continued to be partially off-line, and a new plant was heard to have delayed its start-up date due to the current market economics.

Lubricant consumption was registering lower levels than anticipated, likely because of weaker economic growth than predicted after the lifting of stringent zero-COVID policies and more muted activity in the automotive, industrial and construction segments.

Despite lackluster interest in imports because of plentiful domestic supplies, a couple of base oil import cargoes were discussed during the week. A 10,500-metric ton parcel made up of five grades was mentioned for shipment from Ruwais, United Arab Emirates, to Nantong in late July. A 1,000-ton parcel was lined up for shipment from Singapore to South China in the first half of July.

In another key market, India, the monsoon season and unexpected drought and heat wave in some parts of the country as opposed to heavy rains and flooding in others were causing transportation and logistical issues, which in turn affected industrial and construction activity. Many base oil consumers had padded inventories before the arrival of the monsoon rains and buying appetite for additional cargoes has therefore abated, although there were buyers interested in securing cargoes if the right price were offered. Suppliers appeared willing to lower their price expectations to conclude business, particularly as market observers forecast lengthening supplies in Asia in the coming months.

While the wave of imports observed in India during the previous three months seemed to have subsided, a number of possibilities were still under discussion to ship product from within the region, as well as from faraway origins. A 4,000-ton parcel was on the table for lifting in Daesan, South Korea, to West Coast India at the end of June. About 5,000 tons were quoted for shipment from Houston, U.S., to Mumbai and/or Hazira in mid-July. About 17,000 tons were discussed for shipment from Cartagena, Spain, to West Coast India and the U.A.E. the last week of June. Between 9,000 tons and 11,000 tons were earmarked for shipment from Yeosu, South Korea, to Mumbai or Hazira in late July.

Demand has shown signs of weakening in most countries in Asia, as well as in other regions, but ongoing and upcoming turnarounds have helped keep inventories more balanced, although supplies have started to grow and were likely to become more plentiful as a number of turnarounds were anticipated to be completed in July.

There were two turnarounds at Group III facilities taking place in Spain and South Korea this month, which led to reduced global spot availability of these grades. Some of the product gaps were being filled with base stocks imported from the Middle East, but at the same time, this region was also attracting surplus cargoes of other grades from Asia. For example, a 2,000-ton parcel was mentioned for possible shipment from Karachi, Pakistan, to the U.A.E. in mid-July. A 3,000-ton lot was also likely to be shipped from Mailiao to Hamriyah, U.A.E., in the first half of July.

In Southeast Asia, outages at a couple of Indonesian plants earlier this year had led to limited spot volumes of Group I base stocks, but supply was said to be recovering. A Thai producer was heard to have some availability for July shipment. A key Group II facility in Singapore was heard to have been restarted after a maintenance program, bringing more Group II base oils to the market.

Details of a 2,000-ton parcel that shipped from Mailiao, Taiwan, to Singapore in early June emerged this week, and a 6,100-ton cargo was being discussed for shipment from Port Klang, Malaysia, to Genoa, Italy, and Antwerp, Belgium, in mid-July.

In Northeast Asia, a South Korean producer’s Group II/Group III plant was heard to be undergoing an extended turnaround that started in late May and will last until July.

A second South Korean producer has planned 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.

A Japanese refiner was reported to have started a two-month turnaround at its Group I refinery in late May and was expected to resume production next month. A second Japanese supplier started a turnaround in April and was expected to complete it this month, reducing Group II output. A Group I facility in Japan was also scheduled for permanent closure in the second half of 2023.

Crude oil futures steadied after choppy trading on Thursday, as analysts evaluated the risk of rising interest rates affecting global economic growth and crude demand against a larger-than-expected drop in U.S. crude inventories.

On June 29, Brent crude Augustfutures were trading at $74.34 per barrel on the London-based ICE Futures Europe exchange, from $74.21/bbl on June 22.

Dubai front month crude oil (Platts) financial futures for July settled at $74.54 per barrel on the CME on June 28, from $73.85/bbl on June 21.

Spot base oil price assessments in Asia were steady-to-soft this week, with some grades experiencing small downward adjustments 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 fairly steady, following decreases last week, although discussions for larger cargoes have slowed down and flexibag cargoes continued to attract most of the attention.

The Group I solvent neutral 150 grade was assessed at $870/t-$900/t, unchanged from last week, and the SN500 was hovering at $990/t-$1,030/t. Bright stock was steady at $1,220/t-$1,260/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed at $970/t-$1,010/t, and the 500N was heard at $1,010/t-$1,050/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $700/t-$740/t, but the SN500 was slightly lower by $10/t at $830/t-$870/t. Bright stock prices were also down by $10/t at $950/t-990/t, FOB Asia.

The Group II 150N was assessed down by $10/t at $830/t-$870/t FOB Asia, and the 500N and 600N cuts also slipped by $10/t to $880/t-$920/t, FOB Asia.

In the Group III segment, prices were steady. The 4 cSt was assessed at $1,500-$1,530/t, and the 6 cSt was hovering at $1,470/t-$1,510/t. The 8 cSt grade was heard at $1,090-1,130/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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