A ban on Russian exports of diesel and marine fuels was partly to blame for a global tightening of diesel, which had sent prices up and impacted refiners’ decisions as to what refined products to prioritize. However, Russia has lifted its ban on diesel and marine fuels exports, and this might help alleviate the tight conditions.

Russia’s and Saudi Arabia’s decision to curb crude oil production until the end of the year with the aim of supporting oil prices was also seen as one of the main reasons for crude oil values to have skyrocketed from three months ago. Brent futures were hovering above $95 per barrel this week, from levels around $75/bbl in early July.

Oil prices surged to their highest level in over a year on Thursday after crude stocks at the key storage hub in Cushing, Oklahoma, United States, fell to their lowest since July last year. U.S. West Texas Intermediate futures breached the $95 per barrel mark during Asia trading hours, marking the highest point since August last year.

Brent crude prices also reacted to concerns about a potential supply deficit, with November futures trading at $96.96 per barrel on the London-based ICE Futures Europe exchange on September 28, from $94.30/bbl on Sept. 21.

Dubai front month crude oil (Platts) financial futures for October settled at $94.98 per barrel on the CME on Sept. 27, from $92.88/bbl on Sept. 20.

Recent, ongoing and upcoming plant turnarounds also had a role in decreasing base oil inventories at a number of producers’ facilities, or in limiting their ability to offer spot cargoes.

The only Taiwanese producer of Group II base oils, Formosa Petrochemical, was preparing for a two-month turnaround, starting in mid-October, and building inventories to cover domestic term obligations during the outage. As a result, the producer was expected to suspend most spot exports while the plant was shut down.

A Japanese Group I producer – Eneos – was also expected to have started an extended three-month maintenance program at its Mizushima-A Group I plant, and intended to idle its Group I Wakayama refinery, which houses a Group I plant, permanently in October.

The more restricted availability of Group I and Group II grades, together with climbing production costs, have led suppliers to increase offer levels and buyers to acquiesce to the higher numbers as many have run down existing inventories. This was especially evident within the Group I segment, as supply of several grades has tightened and buying interest has taken off.

Bright stock saw prices move up rapidly as Chinese buyers were vying for cargoes since there is a structural shortage of this grade in the country and it is mostly used in industrial applications and marine and railway lubricants. The Chinese government has been encouraging industrial output to bring the country out of an economic slump and activity was expected to pick up.

Additionally, blenders were preparing for increased lubricant demand ahead of the week-long National Day holiday starting on Oct. 1, when many people travel to their hometowns. In 2019 – before the coronavirus pandemic – about 782 million people traveled during the National Day holiday, with about a third of them driving a vehicle, according to the Ministry of Culture and Tourism.

Buying interest for imports, which had so far been fairly languid in China, appeared to have been rekindled, with more discussions involving imported material being heard. A 5,000-ton parcel was lined up for prompt shipment from Singapore to China. About 10,000 metric tons were expected to be shipped from Daesan and Onsan, South Korea, to Zhapu and Tianjin in mid-October. A 1,000-ton cargo was mentioned for shipment from Yeosu, South Korea, to Tianjin in mid October. A 2,700-ton parcel made up of 5 grades was expected to be lifted from Onsan to Jingjiang, Nantong and Zhangjiagang in mid-October. Another 1,000 tons were on the table for shipment from Yeosu to Rugao in mid October as well.

In Southeast Asia, domestic supplies were not deemed sufficient to cover an uptick in demand as the end of the rainy season in some countries has led to increased activity. Producers at a few origins such as Thailand were also intent on covering domestic demand before offering cargoes for export. Buyers expected to see some Group I spot availability from Indonesia coming to the market in the next couple of weeks, while Group II supplies were deemed more plentiful, and buyers appeared more resistant to the steeper offers. The Group III segment seemed oversupplied, and prices were therefore exposed to downward pressure.

A number of parcels for shipment to the region were discussed during the week. A 5,100-ton parcel was likely to be shipped from Yeosu and Onsan, South Korea, to Koh Sichang, Thailand, in late October. A 5,000-ton lot was mentioned for shipment from Nagoya, Japan, to Singapore at the end of October. About 4,000 metric tons to 5,000 tons were quoted for shipment from Malacca, Malaysia, to Port Klang, Malaysia, the first week of October. A 10,000-ton cargo was expected to be shipped from Dumai, Indonesia, to Ulsan, South Korea, in mid October, possibly to cover intra-company requirements.

In India, CFR prices for the more scant Group I base oils have edged up by between $10/t and $50/t week on week on tight availability, reduced output at local base oil plants as refiners favor distillates production, and revitalized demand. This last factor was mostly prompted by an uptick in industrial activity as the monsoon season wraps up. As regional supplies of Group I grades have tightened, fresh discussions involving Middle Eastern material have emerged. There were also offers of locally-produced Group II base oils that were considered competitive, particularly as spot volumes from Taiwan have been restricted ahead of the producer’s turnaround.

About 3,000 tons to 5,000 tons were being considered for prompt shipment from the East Mediterranean to West Coast India. Another 4,000 tons to 5,000 tons were quoted for lifting in Cartagena, Spain, to West Coast India in late Sep. A second 5,000-ton parcel was mentioned for shipment from Singapore to Chennai in Oct. A 22,000-ton lot was on the table for shipment from Sitra, Bahrain, or Ras Laffan, Qatar, to West Coast India in first half Oct. A 2,000-ton to 4,000-ton cargo was discussed for shipment from Daesan and/or Pyongtaek, South Korea, to West Coast India in mid Oct.

Base oil spot price assessments were mixed again in Asia this week, with prices for a number of grades moving up, some remaining unchanged, 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 higher from the previous week. The Group I solvent neutral 150 grade was up by $20/t at $820/t-$860/t, and the SN500 was steeper by $10/t at $940/t-$980/t. Bright stock jumped by $50/t to $1,120/t-$1,160/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed up by $20/t at $990/t-$1,030/t and the 500N was higher by $20/t at $1,050/t-$1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was higher by $20/t at $740/t-$780/t, and the SN500 also climbed by $20/t to $870/t-$910/t. Bright stock prices leapt by $50/t to $960/t-1,000/t, FOB Asia on limited availability.

The Group II 150N edged up by $10/t to $880/t-$920/t FOB Asia, and the 500N was also higher by $10/t at $910/t-$950/t, FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices fell again this week due to plentiful supplies and competition among suppliers. The 4 cSt was assessed lower by $20/t at $1,320-$1,350/t, and the 6 cSt fell by $10/t to $1,290/t-$1,330/t. The 8 cSt grade slipped by $30/t to $1,030-1,070/t, amid thin discussions and growing supply. 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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