Asia Base Oil Price Report

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Economic uncertainties in China raised concerns about the well-being of other Asian nations, as the second largest economy in the world has significant influence on industrial production, consumer demand and the general prosperity of many countries in the region. For one, China typically imports large quantities of base oils from Southeast Asia but has been less enthusiastic in recent months. Investment banks have lowered their forecasts for China’s economic growth to below 5%, a level not seen since the early 1960s, with the exception of the pandemic years. Despite these uncertainties, Asian base oil prices seemed to be able to maintain a steady course, supported in part by a tightening supply and demand ratio, and by firm crude oil and feedstock prices.

Chinese base oil imports from Thailand, Indonesia and Singapore fell over the last three months, partly because of seasonal patterns and curtailed supplies of certain grades given planned and unplanned production outages in Southeast Asia, but also because of an unpredictable outlook for lubricants demand in the coming months. While lubricant and base oil demand tends to increase in China in September, ahead of the National Day and Golden Week holidays between Sep. 30 and Oct. 6 – when the population does a lot of traveling – this year, this trend appeared to be less likely to be robust. At the same time, Chinese refiners were building inventories of fuels such as diesel to prepare for an uptick in demand, and exports of these products have been curtailed, driving prices up in the region.

Domestic base oil demand was deemed sufficient to cover most requirements in China, and blenders preferred to secure only the necessary volumes to keep operations running and avoid an inventory build. While buying appetite for imports has abated, there were discussions for South Korean cargoes to be shipped to China this month. There was mention of a 1,500-metric ton parcel to be shipped from Onsan to Tianjin in late August. A 1,000-ton lot was expected to have been lifted in Onsan for Zhangjiagang last week, as well as another 1,000-ton cargo from Yeosu to Rugao.

China had also been receiving substantial amounts of API Group II grades from Taiwan, but the Taiwanese producer was heard to have curtailed shipments as it builds inventories to cover term requirements during a scheduled turnaround in October. Shipments from South Korea have also declined, and some domestic plants in China were heard to have either trimmed operating rates or shut down temporarily due to the current market conditions. A new Group III unit was reported to have come on stream this month and was expected to keep away some Group III imports from Asia and the Middle East. There has been talk about a key Group III producer in China engaging a distributor to ship excess production to the United States as prices there were more attractive than at other destinations.

Market participants kept a watchful eye on crude oil and feedstock prices. Although the fast increase in crude oil values observed since June appeared to have slowed down, prices were still hovering at elevated levels and were exerting upward pressure on base oils and other refined products. Diesel prices have also strengthened, and margins have increased compared to base oils, offering an incentive for refiners to stream more feedstocks into the production of distillates. This meant that base oil output has declined, particularly in Southeast Asia, and certain grades have tightened, spurring a wave of increases.

At the same time, demand for base oils has been healthy in Southeast Asia and export volumes have dwindled, particularly of the Group I grades, but there has been steady interest in imports. There were discussions to move about 5,500 metric tons of base oils from Yeosu, South Korea, to Southeast Asia in late August, and negotiations were heard to be starting to take place for September shipments. Prices for the Group I and Group II cuts showed some strengthening, while values for the Group III cuts have stabilized, although supply was deemed ample.

Similar price movements were also observed in India, where demand and pricing have been mixed. Group I and II prices have inched up, while Group III values have dipped. As the end of the monsoon season was approaching, buyers have started to show interest in replenishing base oil supplies and suppliers have increased offers of those grades that were in higher demand. Firm crude oil and feedstock prices lent additional support to these indications.

On the other hand, domestic suppliers have lowered prices in order to protect or gain market share. There were indications that new Group II and Group III capacity from a domestic producer might come on stream in late September or early October. Some Indian refiners continued to enjoy the advantage of being able to process Russian crude, which is sold at a discount due to international sanctions. Refiners were also expected to evaluate whether it was more advantageous to produce more fuels as opposed to continuing with the current levels of base oil output.

Crude oil futures slipped by 1% on Wednesday as demand from China was expected to be reduced and weak manufacturing data globally outweighed optimism regarding a larger-than-expected drop in U.S. crude stocks, Reuters reported.

On Aug. 24, Brent crude October futures were trading at $82.87 per barrel on the London-based ICE Futures Europe exchange, from $83.69/bbl on Aug. 17.

Dubai front month crude oil (Platts) financial futures for September settled at $83.86 per barrel on the CME on Aug. 23, from $83.55/bbl on Aug. 16.

Base oil spot price assessments were stable-to-firm in Asia this week. 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 mostly steady, but some grades moved up week on week. The Group I solvent neutral 150 grade was assessed at $800/t-$830/t, and the SN500 was holding at $920/t-$960/t. Bright stock was hovering at $1,070/t-$1,110/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed at $920/t-$960/t, but the 500N edged up by $20/t to $980/t-$1,020/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $670/t-$710/t, and the SN500 was also unchanged at $760/t-$800/t. Bright stock prices were up by $10/t at $840/t-880/t, FOB Asia.

The Group II 150N was assessed up by $10/t at $790/t-$830/t FOB Asia, while the 500N and 600N cuts also moved up by $10/t to $840/t-$880/t, FOB Asia.

In the Group III segment, prices were steady to slightly higher. The 4 centiStoke was assessed unchanged at $1,410-$1,440/t, and the 6 cSt at $1,370/t-$1,410/t. The 8 cSt grade was adjusted up by $10/t to reflect discussions 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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