Asia Base Oil Price Report

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Price uncertainties and a hazy lubricant demand outlook were keeping base oil consumers from acquiring large cargoes, as many blenders preferred to run plants with just enough product to sustain daily operations. Still, there was an uptick in orders in some areas as climbing crude oil and feedstock prices prompted some participants to secure base stocks ahead of potential price movements. The downward price trend observed in recent weeks seemed to have stalled for some grades on more balanced fundamentals.

Crude oil prices continued on an upward trek on expectations of tightening supplies given production curbs from OPEC+ members and allies, along with increased demand from China, which is currently the world’s largest importer of crude oil. Russia has been one of the biggest oil suppliers to China since the beginning of the Russian war on Ukraine as Chinese refiners have been taking advantage of discounted prices given international sanctions on Russian exports.

Oil futures inched up on Thursday, with Brent crude leaping over the $84 per barrel mark for the first time since April, boosted by supply tightness following OPEC+ production cuts and renewed bullishness on the outlook for Chinese demand and global growth, according to Reuters.

On July 27, Brent crude Septemberfutures were trading at $83.91 per barrel on the London-based ICE Futures Europe exchange, from $79.72/bbl on July 20.

Dubai front month crude oil (Platts) financial futures for August settled at $83.12 per barrel on the CME on July 26, from $79.84/bbl on July 19.

In the key market China, requirements for imported base oils were still subdued, as demand in general was lower than expected because of the country’s less robust economic recovery than previously expected. Bright stock might be an exception since China has a deficit of this grade and it is still in high demand in industrial, marine, and other applications. There were reports of a few cargoes having been acquired from Southeast Asia, which continues to be a critical source of API Group I base oils for the region.

Aside from the fact that importers were not acquiring huge amounts of imports given plentiful domestic supply, there were expectations that some plants may reduce operating rates or stop running temporarily to avoid a large product overhang. A number of Chinese plants were heard to have shut down or have been running at trimmed rates on account of market economics, and the start-up of a new Group III unit has been delayed for the same reasons.

In contrast, several plants have returned to operations following turnarounds in Asia and other regions, including two large Group III units – one in Onsan, South Korea, which also produces Group II, and one in Cartagena, Spain – which fed expectations of increased supplies becoming available.

A second South Korean Group III producer was heard to have postponed its turnaround until the first or second quarter of 2024.

With additional product expected to come to the market, South Korean suppliers were eagerly concluding export transactions to several ports, including some in distant locations such as Brazil, where demand for base oil imports has picked up because of upcoming turnarounds at a couple of large plants. A 3,500-metric ton cargo was heard concluded from Onsan to Rio de Janeiro, Brazil, for early August shipment. A 1,000-ton lot was expected to be shipped from Onsan to Singapore in the last week of July. A 1,300-ton parcel was quoted for shipment from Onsan to Bangkok, Thailand, in mid-August.

In Japan, an early July fire at the Eneos Mizushima-A refinery forced the producer to shut down its operations, but the unit was 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 India, most refineries were running at top rates, with many buyers relying on domestic term contracts to meet their base oil needs. Fresh buying interest was at expected levels given that the country was experiencing the consequences of the monsoon rains and demand typically tapers off due to logistical and transportation disruptions, together with a slowdown of economic activities such as construction.

Nevertheless, participants had noted an uptick in purchasing over the previous two weeks, possibly on expectations that the downward price trend may be reversed if crude oil and feedstock costs continued to strengthen, although Indian refiners were able to take advantage of discounted Russian crude oil. The demand upswing seemed to have fizzled out for the time being as buyers preferred to keep lean inventories and there was ready availability of most grades.

Several Group I cargoes from Southeast Asia have been secured for shipment to India in August, tightening regional Group I supplies and supporting price indications. India has also attracted several Group II cargoes over the last few weeks, a number of them originating in the United States and South Korea, with suppliers having adjusted prices down in order to attract buyers and reduce inventories.

Spot shipments from Taiwan were not expected to feature prominently in the next few months as the sole Group II producer was heard to be building inventories ahead of a turnaround in October. Its feedstock supply has also been limited as the refinery that houses the base oils plant has been running at reduced rates over the last two months.

Additional Group III availability in South Korea and the Middle East amid weaker Group III demand in markets such as the U.S. and Europe may free up more product and exert downward pressure on pricing.

Some base oil grades saw a slight regional tightening, which allowed for spot prices to maintain a steady course, but other grades underwent downward adjustments as suppliers lowered offer levels in hopes of stimulating trades. 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 softer from a week ago. The Group I solvent neutral 150 grade was down by $20/t at $830/t-$860/t, but the SN500 was holding at $920/t-$960/t. Bright stock fell by $30/t to $1,100/t-$1,140/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed steady at $900/t-$940/t, and the 500N was lower by $10/t at $930/t-$970/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was softer by $20/t at $680/t-$720/t, and the SN500 was also down by $20/t at $760/t-$800/t. Bright stock prices fell by $20/t to $840/t-880/t, FOB Asia.

The Group II 150N was assessed unchanged at $770/t-$810/t FOB Asia, but the 500N and 600N cuts slipped by $10/t to $810/t-$850/t, FOB Asia.

In the Group III segment, prices were softer on increased availability and competitive pricing. The 4 centiStoke was assessed down by $10/t at $1,470-$1,500/t, and the 6 cSt was lower by $20/t at $1,430/t-$1,470/t. The 8 cSt grade edged down by $10/t to $1,060-1,100/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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