Asia Base Oil Price Report

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Weaker demand in key markets and ample supplies continued to exert downward pressure on some base oil prices in Asia, but values for other grades have stabilized on more balanced conditions. The restart of production plants following turnarounds and the high operating rates at most refineries have led to healthy inventories. Suppliers were trying to find ways to attract orders, but a seasonal slowdown, together with market uncertainties regarding lubricant consumption in the second half of the year, were dampening buying activity.

Crude oil prices inched up on Thursday as Saudi Arabia announced that the country will extend a one-million barrel per day voluntary crude production cut into September, despite the International Energy Agency’s predictions of an increase in demand in the second half of the year. Oil prices had been under pressure for the most part of the first half of the year due to macroeconomic concerns, inflationary pressures, turbulence in the banking sector and a slow recovery in Chinese demand, CNBC.com reported.

On Aug. 3, Brent crude Octoberfutures were trading at $85.25 per barrel on the London-based ICE Futures Europe exchange, from $83.91/bbl for September futures on July 27.

Dubai front month crude oil (Platts) financial futures for September settled at $83.15 per barrel on the CME on Aug. 2, from $83.12/bbl for August futures on July 26.

Base oil buyers preferred to secure smaller volumes so as to avoid price risks, although some consumers have stepped back into the market to place orders as crude oil and feedstock prices have moved up. These conditions could lead to higher base oil prices down the road and some buyers hoped to beat potential price hikes. Others, however, have adopted a wait-and-see attitude as availability of most grades in the API Group I and Group III segments was plentiful, and buyers did not feel rushed to secure more product.

August supplies of Group I grades from Southeast Asia have by and large been snapped up and participants were waiting to discuss September volumes. Prices were said to be generally stable on account of more balanced supply and demand conditions. Given that the number of API Group I producers has dwindled in recent years due to plant rationalizations, many of the existing suppliers have been able to establish a solid buyer base.

An unplanned output reduction at a Group II base oil plant in South Korea was expected to tighten supplies; the producer has reduced operating rates due to feedstock supply issues because of maintenance work at the refinery that houses the base oils unit. The producer was heard to have little extra availability as it had concluded several transactions for August shipment. Other producers did not seem pressed to finalize transactions because they had been able to lower existing inventories during the previous two months.

On the other hand, availability in the Group III segment appeared to be lengthening on plentiful supplies from the Middle East and the resumption of production at a South Korean Group III unit. Consumers have also favored the use of Group II cuts instead of Group III grades whenever applications allowed substitution because of lower Group II prices. This trend has also led to tighter Group II supply conditions while Group III availability has increased, forcing producers to consider a possible dialing down of production rates.

South Korean suppliers have finalized several shipments for the month of August, with about 5,000 metric tons mentioned for lifting in Yeosu to Southeast Asia late in the month. A 1,500-ton lot was expected to be shipped from Yeosu to Tanjung Priok, Indonesia, in the second half of August. A 2,000-ton cargo was quoted for shipment from Yeosu to Rugao, China, in late August. Another 1,200-ton lot was mentioned for shipment from Onsan to Indonesia in late August. A 1,050-ton parcel was heard discussed for shipment from Onsan to Mumbai, India, in mid-August. About 1,000 tons were also on the table for shipment from Onsan to Singapore in the first week of August and a 2,000-ton lot was quoted for lifting in Onsan to Merak, Indonesia, in late August.

Base oil demand in the key market China remained rather lackluster, although this did not come as a surprise as lubricant consumption tends to weaken during the second half of the year, except for a short period ahead of the national Mid-Autumn Festival and National Day in late September to early October. Severe flooding in large areas of the country also affected activities.

Buying interest for imports has declined compared to earlier in the year as most grades appeared readily available from domestic suppliers, with the exception perhaps of bright stock, which importers and distributors were careful to maintain at steady price levels since this cut is typically in deficit. The upcoming start-up of a Group III plant in China this month also dampened demand for Group III imports.

In another key market, India, demand has also been lackluster as domestic supplies were deemed more than adequate and several import cargoes were expected to arrive during the month. The transportation and manufacturing disruptions caused by the monsoon rains also affected buying appetite as lubricant consumption has weakened. Some buyers were holding off on acquiring more product until a clearer demand and price picture emerged, while others ventured into the market to secure cargoes on hopes of beating potential increases given the recent rise in global crude oil and fuel prices.

Moving forward, there were concerns of tighter Group II supplies in India as regular shipments from suppliers in the United States, South Korea and Taiwan were expected to ebb. Some of these suppliers were heard to be sold out, were limiting offer volumes as they were building inventories ahead or after plant turnarounds or were hoping to achieve higher prices in other markets.

Group III supply seemed to tell a different story – there was plentiful availability of most grades within Asia and from the Middle East amid more muted demand from Europe and the U.S., and this was exerting downward pressure on Indian pricing. Prices for most base oil grades in India – with the exception of Group II cuts – fell by about $20 per metric ton this week.

Overall, spot price assessments were stable to soft this week in Asia, with some grades slipping as buying and selling indications were adjusted down. 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 $810/t-$840/t, but the SN500 was holding at $920/t-$960/t. Bright stock fell by $20/t to $1,080/t-$1,120/t, all ex-tank Singapore.

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

On an FOB Asia basis, Group I SN150 was stable at $680/t-$720/t, and the SN500 was also unchanged at $760/t-$800/t. Bright stock prices were hovering at $840/t-880/t, FOB Asia.

The Group II 150N was assessed unchanged at $770/t-$810/t FOB Asia, and the 500N and 600N cuts were also steady at $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 $20/t at $1,450-$1,480/t, and the 6 cSt was lower by $20/t as well at $1,410/t-$1,450/t. The 8 cSt grade was holding at $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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