Oil prices extended gains on Thursday, after rising a dollar per barrel in the previous session, as investors braced for an escalation of the Middle East crisis, with Iran – OPEC’s third-largest oil producer – threatening to retaliate against Israel following the killings of Iranian generals in a blast at the Iranian consulate in Syria earlier this month. Both West Texas Intermediate and Brent contracts had jumped by more than 1% in the prior session after three sons of a Hamas leader perished in an Israeli airstrike in Gaza. Earlier this week, Israel and Hamas had started a fresh round of negotiations with observers hoping for a ceasefire, but so far those discussions have not resulted in any agreements.

On Thursday, April 11, Brent June 2024 crude futures were trading at $90.40 per barrel on the London-based ICE Futures Europe exchange, from $89.39/bbl for May futures on April 4.

Dubai front month crude oil (Platts) financial futures for May 2024 settled at $89.36 per barrel on the CME on April 10, from $88.70/bbl on April 3.

Activity in China has been slightly lackluster, but there has been particular interest for API Group I grades, which have been snug for some time. This condition was exacerbated by the shutdown of the PetroChina Group I unit in Dalian. According to reports, the shutdown was expected to last from late March until May.

Bright stock was the most sought-after grade in terms of imports because domestic supply was short, and additional imported cargoes were anticipated to arrive only later in the month. Group I grades continued to enjoy avid consumption from the industrial, heavy-duty transportation, marine and railway sectors. Given limited spot export supplies from traditional Group I sources in Southeast Asia, the Group I cuts were expected to remain tight for several weeks. Group I export volumes have been less abundant than usual in Thailand, Indonesia and Singapore because of turnarounds in the first few weeks of the year, coupled with healthy domestic demand.

Group II supplies were generally snug in China as well due to turnarounds at local facilities and reduced import volumes from Taiwan. The Taiwanese producer Formosa Petrochemical regularly ships term and spot Group II base oil cargoes to China every month. However, a partial shutdown at the Formosa plant in Mailiao caused by maintenance at the affiliated refinery has restricted availability. Spot supplies from the producer were expected to become more plentiful once the refinery maintenance is completed in late April and the base oil plant ramps up rates.

Additionally, another key Group II supplier that often ships product to China is Hyundai Oilbank-Shell in Daesan, South Korea. The plant was heard to have had a partial shutdown for most of the months of February and March because of maintenance at the refinery that supplies it with feedstocks. The plant was expected to have increased rates this month, but this could not be confirmed with the producer directly.

Group III buying interest was deemed lackluster in China against ample availability of imported cargoes, along with growing on-spec production at a relatively new Chinese Group III base oils unit, which continued to place downward pressure on pricing. At the same time, a domestic Group III plant was expected to be taken off-line for maintenance later this month and was only anticipated to be restarted in June.

In India, buying interest has declined slightly as blenders appeared to have sufficient inventories to run day-to-day operations and there were no product shortages, although some grades were showing a regional tightening. While some suppliers have adjusted offers up to reflect the tighter conditions amid higher crude oil and feedstock prices, many buyers resisted the steeper levels and opted for postponing purchases.

Consumers were anticipated to start building inventories ahead of the monsoon season, which starts in June and brings heavy rains, flooding and logistical headaches. There were expectations of import cargoes arriving from South Korea, the U.S., Spain and the Middle East, so buyers did not feel an urge to jump at the first offer they received. Nevertheless, it was heard that some South Korean offers had inched up and suppliers were standing firm by their indications, despite receiving lower bids.

Several cargoes were discussed during the week for shipment to India, including a 2,000-metric ton lot expected to be lifted in Ruwais, United Arab Emirates (UAE), to Jawaharlal Nehru Port Trust in late April. A 6,000-ton lot was also mentioned for shipment from Ruwais to Mumbai, Chennai and Kolkata in mid-April. A 3,500-ton parcel was on the table for lifting in Marmara, Turkey, to West Coast India (WCI) or the United Arab Emirates. A 3,500-ton cargo was quoted for shipment from Sri Racha, Thailand, to Mumbai at the ed of April. About 19,000 tons were expected to have been lifted from Jeddah and Yanbu, Saudi Arabia, to Mumbai during the end of March to the first week of April. Details also emerged about an 8,000-ton parcel that was shipped from Pascagoula, in the United States, to Mumbai on the Stolt Lerk in mid-February.

Additionally, a 7,500-ton cargo was being considered for shipment from Jeddah and Yanbu to Singapore for any April dates.

There was also adequate domestic availability of Group I grades in India, while additional Group II capacity could become available as a new local unit was anticipated to come on stream this month, taking some of the pressure off of buyers to secure imports. Whether the unit has been producing Group II grades already was not confirmed.

Buying appetite for Group III grades was steady, and despite an ongoing turnaround at a South Korean Group III unit and a regional tightening of supplies, most grades were deemed plentiful in India.

South Korean Group III producer SK Enmove started a routine turnaround at its Group III units in Ulsan on March 13 and expected to complete the maintenance program in mid-April. The company has been able to meet term requirements and has shipped a limited number of spot cargoes as it has built stocks ahead of the turnaround and has continuous production at other sites, but the shutdown was expected to tighten short-term inventory.

A second South Korean Group III producer, S-Oil, has scheduled a turnaround at its Onsan plant in September and October.

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 significant 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 moving up on snug supplies 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 mostly steady, although prices for the Group II 500N inched up. The Group I solvent neutral 150 grade was holding at $890/t-$930/t, and the SN500 was unchanged at $1,030/t-$1,070/t. Bright stock was also steady 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 was heard slightly up by $10/t at the low end of the range at $1,060/t-$1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was stable at $760/t-$800/t, but the SN500 edged up by $10/t at the low end of the range to $910/t-$930/t. Bright stock prices were firm at $1,100/t-$1,140/t, FOB Asia on tight supply.

The Group II 150N was slightly higher by $10/t at the top end of the range at $830/t-$880/t FOB Asia, and the 500N was also up by $10/t at the high end of the spread at $920/t-$970/t FOB Asia, reflecting the movement of some of the benchmark prices.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were largely steady. The 4 cSt grade was hovering at $1,070-$1,100/t, and the 6 cSt was unchanged at $1,060/t-$1,100/t. The 8 cSt cut was assessed at $960-$1,000/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.