On Thursday, March 7, Brent May 2024 crude futures were trading at $82.61 per barrel on the London-based ICE Futures Europe exchange, from $83.12/bbl for April futures on Feb. 29.

Dubai front month crude oil (Platts) financial futures for April 2024 settled at $81.87 per barrel on the CME on March 6, from $81.05/bbl for March futures on Feb. 28.

Market participants kept monitoring developments in the Middle East, as the ongoing Houthi attacks on container ships and oil tankers have driven freight rates up and shipping times have also almost doubled as vessels need to be rerouted around the southern tip of South Africa to avoid passage through the Suez Canal. Asian suppliers have therefore been looking for opportunities to ship material within the region and to the Americas as logistics were deemed less complicated, although vessel space was scarce because some ships were engaged on longer routes, and there have also been delays in the Panama Canal to reach the U.S. Gulf and East Coast of South America.

The general situation concerning API Group I grades has not changed dramatically, with the market still deemed tight due to recent plant shutdowns in Southeast Asia and the permanent closure of plants in Japan. Offers have therefore been raised and despite buyers’ initial resistance to the higher values, some small-volume transactions have taken place at steeper levels. The light-viscosity grades were more readily available than the heavy grades, and many end-users opted for buying Group II grades whenever their formulations allowed for substitutions as values were competitive. Bright stock continued to command attention as it is not easily replaced, and prices remained on an upward trek.

Group II grades had been ample until a couple of weeks ago, but availability has tightened on renewed buying interest. A U.S. producer with production sites in Singapore was heard to have shipped Group II cargoes to Europe to meet commitments there while its plant in Rotterdam, the Netherlands, completes a two-month turnaround which started in January. The producer’s supplies were tight system-wide, according to sources.

Additionally, the Hyundai-Shell Group II plant in Daesan, South Korea, was heard to have had a partial shutdown for most of the month of February because of maintenance at the refinery that supplies feedstocks and continued to run at reduced rates.

Group II base oils may also be less available in the region as the sole Taiwanese producer, Formosa Petrochemical, was heard to be undergoing a partial shutdown for almost two months at its base oils plant, starting in early March, due to maintenance at the affiliated refinery, which supplies feedstocks. Formosa routinely ships base oils to China, India, the Middle East and other destinations, aside from supplying the domestic market.

While there were no Taiwanese cargoes heard to have been concluded for India, there were a number of South Korean and Middle Eastern cargoes lined up for shipment to that country. During the last quarter of 2023 and first two months of this year, several transactions involving U.S. base oil parcels had been concluded for shipment to India, but this activity seemed to have waned as logistics were deemed complicated and prices not as competitive. Still, a 7,000-metric ton to 8,000-ton lot was expected to be lifted in Houston for delivery in West Coast India (WCI) this week. But there will be more of a presence of Asian, European and Middle Eastern shipments this month, with a 5,000-ton cargo on the table for shipment from Yangpu, China, to Mumbai and/or Hamriyah for March dates. A 17,250-ton parcel was mentioned for prompt lifting in Singapore and shipment to Mumbai and Hazira, India, and Karachi, Pakistan. A 6,000-ton lot was discussed for shipment from Antwerp, Belgium, to Mumbai in mid-March. About 14,000 tons made up of two base oils grades were likely to be shipped from Singapore to Mumbai and Karachi in late March.

Additionally, 5,500-ton cargo was discussed for shipment from Yanbu and Jeddah, Saudi Arabia, to Singapore in the second half of March. About 2,000 tons were expected to be shipped from Daesan to Hamriyah, United Arab Emirates, in mid-March. About 1,000 tons were quoted for shipment from Daesan to Singapore in March as well.

Lubricant production was expected to pick up the pace in India as finished products consumption has ramped up ahead of the end of the fiscal year on March 31. Buyers have been in search of Group I and Group II grades as there were concerns about potential shortages, particularly as a local producer has experienced some production hiccups and regional supplies have also tightened. As a result, offer prices for imports have climbed and buyers have acquiesced to the steeper indications, with prices for Group I and Group II grades in India jumping by $10 per metric ton to $40/t on a CFR basis week on week, with the heavy grades seeing the steeper increases. Group III assessments were stable this week as these grades seemed to have turned less abundant in the region.

In China, a number of base oils plants have also been scheduled for a maintenance program this month, restricting the availability of Group II cuts. This would coincide with a period of increased demand from the automotive, industrial and agricultural segments, promoted by the arrival of spring, but could be dampened by economic conditions in China. This week, it was disclosed that the Beijing government has set an economic growth target of 5% for 2024, a goal even the Chinese Premier Li Qiang admitted would be challenging, given the nation’s deeply troubled property market, heavy municipal debts and weak consumer demand, CNN.com reported. 

Buying appetite for imports of the heavier Group I and Group II grades was likely to be more robust than for the lighter grades given that China is still structurally short on the heavy viscosities. With regional supplies tightening, it appeared that buyers were more willing to accept the higher values in order to secure cargoes. A local Group III producer has improved the quality of its base stocks and has offered competitive prices to gain market share, but demand for Group III cuts was still deemed lackluster.

Supplies of Group III grades were described as plentiful in Asia, but a recent Group III plant turnaround in Malaysia, and upcoming maintenance in South Korea were likely to put a dent in spot availability.

The Petronas Group II and Group III refinery in Melaka, Malaysia, was heard to have completed a maintenance program that started in late January, and even though a large part of the producer’s output is used for the company’s own downstream operations, small spot cargoes from the facility have been on offer for March shipment.

SK Enmove was understood to be starting a turnaround at its Group III units in Ulsan, South Korea, on March 13 that will be completed in late April. The company will be able to meet requirements as they have built stocks and have continuous production at other sites, but the shutdown was expected to tighten short-term inventory.

There were also reports that the SK-Pertamina Group III plant in Dumai, Indonesia, would be undergoing a partial shutdown in May, but the effects were expected to be minimal as the producer will build inventories to cover commitments during the outage, according to sources.

Base oil spot prices in Asia were steady to firm this week, with some prices moving up on tightening conditions. 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 firm from the previous week. The Group I solvent neutral 150 grade was unchanged at $870/t-$910/t, and the SN500 was also steady at $1,000/t-$1,040/t. Bright stock climbed by $10/t to $1,250/t-$1,290/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were holding at $960/t-$990/t, and the 500N was unchanged at $1,010/t-$1,050/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $750/t-$790/t, while the SN500 was assessed unchanged at $880/t-$910/t. Bright stock prices inched up by $10/t to $1,080/t-1,120/t, FOB Asia on tight supply.

The Group II 150N inched up by $20/t to $820/t-$860/t FOB Asia, and the 500N was assessed higher by $20/t as well at $880/t-$920/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices seemed to have stabilized. The 4 cSt was hovering at $1,060-$1,090/t, and the 6 cSt at $1,080/t-$1,120/t. The 8 cSt grade was unchanged at $930-$970/t. 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.