While prices had generally been on an upward trend earlier in the week, they fell about 3% on Thursday due to concerns about future oil demand after the release of weaker-than-expected Chinese industrial data on Tuesday, along with reports of a large crude build in the United States. The possibility of prolonged higher interest rates in the U.S. were raising concerns about a delay in the global economic recovery and the outlook for oil demand.

On Thursday, April 18, Brent June 2024 crude futures were trading at $87 per barrel on the London-based ICE Futures Europe exchange, from $90.40/bbl on April 11.

Dubai front month crude oil (Platts) financial futures for May 2024 settled at $86.59 per barrel on the CME on April 17, from $89.36/bbl on April 10.

Aside from receiving support from firm crude oil and feedstock prices over the last several weeks, supply of a number of base oil grades has tightened, sending prices to higher ground. This was the case of the API Group II grades, as demand for these base oils has improved and availability was not particularly plentiful. However, Group I prices were also holding their own as they have remained in short supply for the last several months, given turnarounds and heightened domestic demand in countries where Group I grades are produced, including Indonesia, Thailand and Japan. Two Eneos plants in Japan were also closed permanently over the last two years, adding to the already tight supply situation in the region.

In China, a number of base oil facilities were heard to be running at reduced rates or were shut down for maintenance, leading to tighter conditions in certain segments. This has also exacerbated the constant deficit of the heavy viscosity grades in China, with bright stock stepping into the spotlight once again as it is still a highly sought base stock in China for industrial, heavy-duty transportation, marine and railway applications. A turnaround at a key local refinery was also restricting the availability of Group I grades. Some Thai volumes were anticipated to be shipped to China this month, and together with existing inventories, were expected to cover most requirements. A 3,000-ton cargo was discussed for shipment from Rayong, Thailand, to Nantong in the first week of June. The tighter conditions have prompted local producers to seek higher price levels.

Group II supplies remained snug in China 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. A 2,000-ton cargo was under discussion for shipment from Mailiao to Manila, Philippines, in late May.

Additionally, another key Group II supplier that often ships product to China is South Korean producer Hyundai Oilbank-Shell. The producer had shipped lower volumes to China in February and March due to a partial turnaround at its plant in Daesan while the affiliated refinery underwent maintenance. However, increased spot volumes were anticipated to become available this month.

Group III prices were deemed generally stable, although a local producer was hoping to raise prices on climbing feedstock costs and improved product specifications. The supplier might also receive support from the fact that a second producer will be starting a turnaround in late April.

A number of South Korean cargoes have been discussed for shipment to China, with a 1,200-metric ton lot mentioned for prompt shipment to Jingjiang, while a 1,000-ton cargo was on the table for lifting in Onsan and delivery in Tianjin in early May. A 3,500-ton parcel was also quoted for shipment from Onsan to Huizhou in early May. A 6,100-ton cargo made up of five grades was expected to be shipped from Singapore to Tianjin in late April to early May, likely to cover intra-company product needs.

Other cargoes originating in Southeast Asia included a 1,000-ton lot expected to be shipped from Sriracha, Thailand, to Manila the first week of May.

One factor that may be exerting downward pressure on Group II pricing in the region in the coming weeks is the arrival of imports from the U.S., particularly in India. This week, there were ongoing discussions for May shipments, including a 6,000-ton lot for late April to early May lifting from Houston to Mumbai.

Indian importers will not only be receiving U.S. Group II products, but have also booked cargoes from Southeast Asia and South Korea, with a 2,000-ton cargo expected to be shipped from Sriracha, Thailand, to West Coast India in late April and a second 2,000-ton lot mentioned for shipment from Rayong to WCI in the second half of April as well. About 10,000 tons to 17,000 tons were quoted for shipment from Onsan, South Korea, to Mumbai in mid-May.

For the time being, however, base oil prices were deemed generally stable in India, with only bright stock edging up by about $10/t on a CFR India basis this week because this grade is difficult to replace. Snug Group I and Group II supplies throughout the region, together with firm crude oil and feedstock prices, supported the current pricing structure. However, some Group II imports were expected to arrive during the second half of April and fresh shipments from the U.S. Gulf were likely to be finalized over the next few weeks.

Group III prices in India have come under pressure as importers were holding plentiful supplies and were hoping to attract buyers by lowering prices by around $5/ton to $10/ton.  

In contrast, demand for Group III grades was generally steady in other parts of Asia, and an ongoing turnaround at a South Korean Group III unit has led to a tightening of spot supplies, supporting higher offers.

South Korean Group III producer SK Enmove started a routine turnaround at its Group III units in Ulsan on March 13 and was expected to complete the maintenance program in late 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.

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.

Once these plants complete their shutdowns, supply of Group III grades was anticipated to again teeter on the edge of oversupply until later in the year, when a second South Korean Group III producer, S-Oil, has scheduled a turnaround at its Onsan plant in September and October.

South Korean base oil suppliers were in discussions to conclude several export transactions and were checking on vessel space availability. Aside from those cargoes mentioned above, a 3,800-ton cargo was mentioned for possible shipment from Ulsan to Singapore in late April to early May.

Base oil spot prices in Asia were steady-to-firm again this week, with prices for some grades 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 to firm. 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 unchanged from a week ago at $1,300/t-$1,330/t, all ex-tank Singapore.

Prices for the Group II 150 neutral edged up by $20/t to $980/t-$1,010/t and the 500N moved up by $20-30/t to $1,080/t-$1,120/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was stable at $760/t-$800/t, and the SN500 was holding at $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 higher by $10/t at $840/t-$890/t FOB Asia, and the 500N was also up by $10/t at $930/t-$980/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were exposed to upward pressure on tighter supply. The 4 cSt grade was up by $20/t at $1,090-$1,120/t, and the 6 cSt was also up by $20/t at $1,080/t-$1,120/t. The 8 cSt cut was assessed up by $20/t as well at $980-$1,020/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.