Weekly Asia Base Oil Price Report


Base oil prices were generally higher in Asia on increasing buying interest and tighter availability, but values in some pockets of the market were steady due to more balanced supply and demand factors. Firm crude oil and feedstock prices over the last few weeks also offered support to the current price ideas. Buyers remained cautious and preferred to secure small volumes, in case fundamentals shifted in the coming weeks.

Both Brent and West Texas Intermediate futures were on track to finish higher for a third consecutive month and were up by about 4.5% from last month, Reuters reported. On Thursday, futures edged up following two sessions of downward adjustments due to an unexpected rise in United States crude oil and gasoline inventories – partly driven by robust crude imports and sluggish gasoline demand.

However, oil investors returned to buying mode on Thursday as they expected demand to increase in the coming months. There were predictions that both the U.S. Federal Reserve and the European Central Bank would start to cut rates in June, and lower interest rates would encourage oil demand. Ongoing Ukrainian attacks on Russian energy infrastructure also offered price support, while the lack of a ceasefire deal between Israel and Hamas meant the continuation of tensions on several fronts in the Middle East.

On Thursday, March 28, Brent May 2024 crude futures were trading at $86.46 per barrel on the London-based ICE Futures Europe exchange, from $86.44/bbl on March 21.

Dubai front month crude oil (Platts) financial futures for April 2024 settled at $85.71 per barrel on the CME on March 27, from $85.50/bbl for March futures on March 20.

Activity in some countries was subdued due to the observance of Ramadan, Holi and Easter holidays, but was expected to restart with renewed energy next week, when buyers in many countries prepare inventories for the busier spring season.

API Group I export availability from Southeast Asia has improved as plants were heard to be running well, but producers continued to prioritize domestic demand over exports. Some Indonesian Group I cargoes changed hands last week, and there were also offers of European parcels at slightly more elevated prices. The price ranges portrayed below have been adjusted to reflect these price discussions. Bright stock remained in high demand and prices were therefore firm.

Group II supplies have tightened, with a South Korean producer heard to be sold out for April already. The seller was anticipated to start offering May cargoes this week. The light grades appeared to be more readily available than their heavier counterparts and offers for the latter have climbed. The upward pressure on the Group II heavy grades also boosted prices for the Group III heavy-viscosity grade.

A number of South Korean base oil cargoes were expected to be lifted in April, including a 10,000-metric-ton to 14,000-ton parcel likely to be loaded in Onsan for Mumbai in early April, and a 2,000-ton to 3,000-ton lot anticipated to cover the same route the first week of April. Additionally, a 4,000-ton to 5,000-ton cargo was on the table for shipment from Taiwan to West Coast India or the United Arab Emirates in late April. About 15,000 tons were also mentioned as having shipped from Singapore to Mumbai and Karachi, Pakistan, in early March.

In China, Group II availability has become less abundant due to turnarounds and reduced output at a couple of facilities. China typically imports substantial amounts of Group II base oils from Taiwan, but Formosa Petrochemical, the sole Taiwanese producer, was heard to be undergoing a partial shutdown since early March that was expected to last for almost two months and supplies from the producer were more limited. The shutdown was linked to maintenance at the affiliated refinery, which supplies feedstocks to the Group II base oils plant. Spot availability from the producer was anticipated to grow once the refinery maintenance is completed in late April and the base oil plant ramps up rates.

The Hyundai-Shell Group II plant in Daesan, South Korea – which also regularly ships Group II grades to China – 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, although this could not be confirmed with the producer directly.

At the same time, there were expectations of an increase in Group III supplies, as a local producer was offering several cargoes. A Middle East producer was expected to move additional volumes to China as demand in Europe and the U.S. has lukewarm, but the observance of Ramadan may delay the transactions.

There was also talk about a Group I plant shutting down in China next month, which would take significant bright stock volumes out of the system, but a new bright stock plant was expected to start operations soon, although the start-up schedule could not be confirmed. A 2,900-ton cargo was mentioned for shipment from Sri Racha, Thailand, to Huizhou and Ningbo in late March to early April. A 5,000-ton lot was also on the table to ship from Malacca, Malaysia, to Weifang in the second half of April.

Economic uncertainties in China continued to affect activity in downstream lubricant and finished products segments, and this has turned importers cautious. Lubricant manufacturers were heard to be targeting higher finished product prices to offset firm raw material and production costs, but ongoing competition and a need to protect market share may hinder these initiatives.

In India, blenders had been busy finalizing production ahead of the end of the fiscal year on March 31, and had therefore built base oil inventories during the previous weeks. This coincided with the need to have enough stocks before the start of the monsoons in June, when the heavy rains and potential flooding make transportation and logistics more challenging. Recent production outages at local plants and a tightening of regional supplies had catapulted prices to higher levels in previous weeks, but prices were said to have stabilized.

There were also expectations of additional Group II capacity becoming available as a new unit was anticipated to come on stream this month or in early April.

Healthy appetite for Group III grades continued to be observed in India, and this was offering support to current price ideas. Part of this fresh interest was attributed to strong automotive sales, particularly for passenger cars which require premium lubricants manufactured with high performance base oils within the Group III category. Tightening supplies of Group II grades was also pushing consumers to use Group III cuts whenever formulations allowed, and prices were deemed competitive.

Ongoing and upcoming plant turnarounds in Asia have tightened Group III supplies, although the affected producers were meeting contractual obligations as scheduled.

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

The SK-Pertamina Group III plant in Dumai, Indonesia, was heard to have been scheduled for a partial shutdown in May, but this was not expected to have a big impact on supplies as the producer will build inventories to cover commitments during the outage.

Base oil spot prices in Asia were steady to firm this week, with some prices edging up on tight conditions and increased bid and offer levels. 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 slightly up by $10/t at $890/t-$930/t, and the SN500 also inched up by $10/t to $1,020/t-$1,060/t. Bright stock was steady after edging up last week at $1,300/t-$1,330/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were holding at $960/t-$990/t, but the 500N climbed by $10/t to $1,040/t-$1,080/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was inched up by $10/t to $760/t-$800/t, while the SN500 was steady at $900/t-$930/t. Bright stock prices were assessed up by $10/t at $1,090/t-$1,130/t, FOB Asia on tight supply.

The Group II 150N edged up by $10/t to $830/t-$870/t FOB Asia, but the 500N was steady at $920/t-$960/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were mixed. The 4 cSt grade was hovering at $1,060-$1,090/t, and the 6 cSt was holding at $1,050/t-$1,090/t. The 8 cSt cut was up by $10/t at $950-$990/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.

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