Asia Base Oil Price Report

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Base oil buyers were reassessing their purchase strategies in view of diverging market conditions. On the one hand, weaker demand and increasing supplies in Asia following the restart of base oil units after routine turnarounds and unexpected plant issues exerted downward pressure on pricing. On the other, rising crude oil and feedstock costs were anticipated to impact base oil prices and refinery run rates in the coming weeks. Weather-related disruptions could also affect market activity, as extreme rain has caused floods and landslides in India, China, Japan, South Korea and several Southeast Asian nations.

Most Asian plants were operating at top rates, given advantageous base oil margins compared to distillates in the last few months. This trend led to plentiful supplies and healthy inventory levels, with suppliers adjusting base oil spot prices down in order to promote sales and avoid a large product overhang. However, the recent hike in crude oil and feedstock prices was expected to encourage some refiners to reevaluate operations and possibly increase diesel production. They may receive further encouragement from slowing base oils demand and fewer export opportunities as prices in other regions have slipped as well. The next few weeks could be key in terms of refining decisions and whether the climbing crude oil values might be reflected in base oil values. Some base oil formulas, such as the ones utilized in Japan, include a crude oil price index and fluctuations are typically reflected in base oil pricing the subsequent quarter.

The steeper oil prices have also prompted some buyers to step into the market to acquire cargoes before a potential price increase. However, most transactions involved smaller cargoes as consumers remained wary of unexpected price swings.

Crude oil prices have strengthened on prospects of reduced output by members of the OPEC+, particularly Saudi Arabia and Russia. Oil futures settled slightly higher on Thursday on reports of a drop in U.S. crude inventories and substantial crude imports by China, but a weaker global demand outlook dampened further upward adjustments.

On July 20, Brent crude Septemberfutures were trading at $79.72 per barrel on the London-based ICE Futures Europe exchange, from $81.65/bbl on July 13.

Dubai front month crude oil (Platts) financial futures for August settled at $79.84per barrel on the CME on July 19, from $80.94/bbl on July 12.

Chinese appetite for base oil imports remained lackluster because of plentiful domestic supplies, with the exception perhaps of API Group I bright stock, which is structurally short in China. Most refineries in China were operating at top rates as many were taking advantage of discounted Russian crude oil imports, giving China an edge in terms of refined products exports. Despite a weaker-than-expected recovery of its economy, China has been importing massive amounts of crude oil, particularly from Russia. According to a Financial Times article, China’s customs data reflected that Russian imports have been cheaper than those from other OPEC+ countries since the war in Ukraine started. Compared with the unit price of Saudi Arabian crude, Russian oil enjoyed a discount of $9 a barrel at the end of 2022 and $11 a barrel in June.

While most Chinese base oil units were heard to be running well, a new Group III facility that was poised to start in the first half of the year may delay its start-up due to current market economics. A Group II base oils plant was also said to be undergoing a maintenance program this month. Uncertainties related to lubricant demand in the next few months amidst moderate economic growth and a newly revised consumption tax on white oils also impacted base oils demand in China.

In India, the monsoon rains and economic concerns have had an impact on general base oils and lubricants consumption, although there has been a slight uptick in buying interest as crude oil and gasoil prices edged up. Nevertheless, risk-averse buyers seemed to be interested in securing only smaller cargoes, as it was unclear how strong demand would be at the end of the monsoon season in September.

Expectations of the arrival in India of several imported base oil cargoes gave buyers some confidence as no product shortages were anticipated, while local producers were also running refineries at high rates to take advantage of discounted Russian crude oil, which in turn allowed suppliers to offer competitive domestic pricing. Nevertheless, South Korean and Taiwanese sellers continued to discuss shipments to India as buying interest from other countries was sluggish.

As mentioned above, the restart of production at several base oil facilities following turnarounds and unexpected output disruptions this month will likely coincide with weakening base oil demand. This situation was an added incentive for suppliers to offer decreases on a number of base oil grades, particularly the heavy-viscosity cuts.

In Southeast Asia, a large Group II plant in Singapore has reportedly been restarted after a maintenance program in June. There were reports of another Southeast Asian plant suffering some unexpected production issues last week, but further details were unavailable and there was no apparent impact to regional supply.

In Northeast Asia, there were reports of a fire at the Eneos Mizushima-A refinery the first week of July, which forced the producer to shut down its operations. However, the supplier expected to be back on stream before the end of the month or early August, according to reports. A Group I facility in Japan was also scheduled for permanent closure around September or October of this year. In 2022, Eneos Corp. announced plans to produce biobased lubricants and greases made with its proprietary base oils derived from vegetables by 2023 and contribute to the country’s efforts to reduce carbon dioxide emissions.

In Taiwan, the sole Group II producer will be padding inventories to cover term requirements during an upcoming turnaround in the fourth quarter. The producer, which typically ships vast amounts of base oils to China, has concluded business into other destinations such as India because of weaker demand in China.

A South Korean Group II and III plant was expected to resume production this week, while a second South Korean Group III producer was heard to have postponed its turnaround until the first or second quarter of 2024. South Korean suppliers were focusing on concluding export business to various destinations, including some faraway ports in South America. A 3,500-metric ton cargo was being discussed for shipment from Onsan to Rio de Janeiro, Brazil, in early August. Within Asia, about 2,700 tons were expected to be shipped this week from Onsan to Wakayama, Japan, and a 3,300-ton lot was mentioned for lifting in Yeosu to Tanjung Priok, Indonesia, this month as well. A 1,000-ton parcel was on the table for shipment from Onsan to Singapore in late July, and another similar parcel was quoted from Onsan to Bangkok, Thailand, in mid-August.

Spot base oil price assessments in Asia have generally moved down this week due to softer fundamentals, although a number of price spreads held steady. The 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 softer from a week ago. The Group I solvent neutral 150 grade was down by $20/t at $850/t-$880/t, and the SN500 slipped by $20/t as well to $920/t-$960/t. Bright stock fell by $30/t to $1,130/t-$1,170/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed down by $20/t at $900/t-$940/t, and the 500N was also lower by $20/t at $940/t-$980/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $700/t-$740/t, but the SN500 was down by $20/t at $780/t-$820/t. Bright stock prices slumped by $30/t to $860/t-900/t, FOB Asia.

The Group II 150N was assessed down by $20/t at $770/t-$810/t FOB Asia, and the 500N and 600N cuts also slipped by $20/t to $820/t-$860/t, FOB Asia.

In the Group III segment, the 4 centiStoke price range edged down on increasing competition. The 4 cSt was assessed lower by $10/t at $1,480-$1,510/t, but the 6 cSt was unchanged at $1,450/t-$1,490/t. The 8 cSt grade was holding at $1,070-1,110/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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