Asia Base Oil Price Report

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Base oil prices were generally stable-to-higher in Asia, supported by firm crude oil and feedstock prices amid a tightening supply and demand balance. This situation was partly attributed to heightened buying interest from a few consumers, who were in need of replenishing stocks, and the reduction of base oil output at some refineries which were favoring fuels output because of snug supplies and attractive margins. An exception may be the API Group III grades, which were deemed in ample supply and were therefore exposed to downward price pressure.

Gas oil supplies have declined, and prices have been on the rise, competing with Group I and Group II base oil values and encouraging refiners to steer more feedstocks into the distillates stream. Additionally, planned and unplanned shutdowns of base oil units in the region might bring about a further tightening of base oil availability.

There were reports that the crude unit at the Hyundai Oilbank refinery in Daesan, South Korea, had suffered a fire on Aug. 25 and this affected the availability of feedstocks to run the affiliated Hyundai and Shell Base Oil Co. base oil plant. As a result, the base oils unit was expected to be down for at least a week while the company procured imported feedstocks, sources said. Base oil production was anticipated to resume on September 1, and spot shipments have been restricted as a result of the outage, but term obligations were expected to be met.

Group II spot availability had already dwindled in Asia given that the sole Taiwanese producer, Formosa Petrochemical, was planning to shut down its plant in Mailiao for a two-month turnaround in October. The producer has been building inventories to cover term requirements during the outage but has limited its spot sales and also its shipments to China. Taiwan also often exports Group II base oils to India.

In Japan, a small fire broke out when lightning hit a storage tank at the Eneos Mizushima-B refinery in Kurashiki on Aug. 23, but the fire was contained and did not cause injuries or production disruptions, local media reported. Eneos was also preparing to take down its Mizushima-A Group I plant for an extended turnaround, starting this week and expected to last three months. Eneos has also planned to decommission its Wakayama refinery, which produces Group I base oils, by October of this year, following the permanent closure of the company’s Negishi CDU 1 and base oils plant in October of last year. The Wakayama refinery is 81 years old and will be closed due to declining domestic demand of refined products, given factors such as falling population numbers, decarbonization efforts and a shift to electric vehicles, the company said in a statement. Eneos was also expected to use the Wakayama site for the development of alternative energy sources, such as solar or biomass.

In India, Bharat Petroleum was understood to have scheduled a turnaround at its refinery in Mumbai which will result in a partial shutdown of the base oils plant, affecting Group II production, starting in September.

These supply outages, together with an uptick in demand as buyers had delayed purchases for as long as possible, but some have now stepped back into the trading scene, have led to a tighter supply and demand scenario. Suppliers have increased offers and despite initial buyer resistance, some of the increases have been pushed through.

There has been increased appetite for Group I cargoes from Southeast Asia, with most sellers said to be nearing a sold-out position for September. Bright stock in particular was eliciting keen interest as there were limited offers of this product.

Base oils were receiving additional price support from firm crude oil and feedstock prices. Crude oil futures continued on an upward trek on Thursday on United States government reports of a significant draw in crude oil inventories, coupled with concerns about supply disruptions caused by Hurricane Idalia along the U.S. Gulf Coast. Expectations of higher Saudi Arabian official selling prices for October placed additional pressure on values.

On Aug. 31, Brent crude October futures were trading at $86.07 per barrel on the London-based ICE Futures Europe exchange, from $82.87/bbl on Aug. 24.

Dubai front month crude oil (Platts) financial futures for September settled at $86.16 per barrel on the CME on Aug. 30, from $83.86/bbl on Aug. 23.

While Group I and Group II prices received support from the above-mentioned factors, ample availability of most Group III grades, together with prospects of fresh capacity coming on stream, placed downward pressure on values.

In China, Hongrun Petrochemical started up its new Group III plant in Shandong this month, and in India, a new Group II and Group III base oils unit was slated to be started up in September or October. This might encourage these countries to reduce their imports of Group III base oils from South Korea and the Middle East, but the impact of the new capacity remained to be seen.

Chinese demand for base oil imports has generally been lackluster given uncertainties about lubricant demand in coming months triggered by a slowing economy. Domestic supplies were deemed sufficient to meet demand and importers remained cautious as offers of most base oils have moved up but could dip in coming weeks if regional supply lengthened.

In India, a similar mixed price scenario has surfaced, with Group I and Group II prices holding steady or moving up between $5 to $20 per metric ton on a CFR India basis because of higher offers and limited availabilities. Group III prices were under pressure as there were plentiful Asian and Middle Eastern supplies amid limited buying activity.

Indian buyers were still holding off on purchasing base oils as it was too early to ascertain whether lubricant demand would pick up in earnest at the end of the monsoon season in September. Requirements tend to improve ahead of the Diwali festival in mid-November, and many manufacturers prepare inventories for the heightened consumption of finished products during the previous months. Fresh base oil transactions involving U.S. products have by and large been absent, although there were reports of negotiations for spot Group II cargoes going on this week, despite a short shutdown at a large U.S. Group II plant as it was not expected to have any effect on supplies.

Base oil spot price assessments were mixed in Asia this week, with a few grades moving up, some remaining unchanged from a week ago, and others edging 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 mostly steady, but some grades inched up week on week. The Group I solvent neutral 150 grade was unchanged 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 up by $10/t at $930/t-$970/t on tighter supply, and the 500N edged up by $10/t as well to $990/t-$1,030/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $670/t-$710/t, but the SN500 jumped by $30/t to $790/t-$830/t. Bright stock prices were up by $20/t at $860/t-900/t, FOB Asia.

The Group II 150N was assessed up by $10/t at $800/t-$840/t FOB Asia, while the 500N and 600N cuts also inched up by $10/t to $850/t-$890/t, FOB Asia.

In the Group III segment, prices lost some territory due to plentiful supplies and competition among suppliers. The 4 cSt was assessed lower by $20/t at $1,390-$1,420/t, and the 6 cSt also dipped by $20/t to $1,350/t-$1,390/t. The 8 cSt grade was unchanged at $1,070-1,110/t, amid thin discussions. All indications are 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.

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