Weekly Asia Base Oil Price Report


Increased availability of some base oil grades was starting to exert downward pressure on prices in Asia, but values for most cuts were steady-to-firm as supply was generally balanced against demand. Discussions picked up the pace following religious holidays in several countries, while they were expected to slow down in places like Japan due to the start of Golden Week on April 29.

There continued to be balanced-to-tight conditions reported in the API Group I segment as consumption was still robust in Asia, while the number of plants that produce Group I grades has significantly decreased over the last few years, with one plant having been shuttered in Japan as recently as last year. Rerefined base oils might offer an alternative as these oils were gaining buying interest. Southeast Asia remains the main source of Group I grades, and exports from countries such as Thailand, Indonesia and Singapore reach various destinations throughout Asia. However, due to plant turnarounds earlier this year and healthy domestic demand in these countries, availability of export cargoes has dwindled. This has led to firm Group I prices, with bright stock values moving up steadily since the beginning of the year.

In key base oil consumer countries such as China, bright stock is still in high demand because it is a difficult cut to replace and the country is structurally short of bright stock, while demand from the industrial, heavy-duty automotive, railway and marine segments remains strong. As a result, prices for this grade maintain a high profile throughout the year. A large local Group I producer was heard to have shut down its plant for a turnaround earlier this month, limiting the availability of Group I grades. There have been discussions involving Thai imports, and importers were also on the lookout for product of other origins, with Group II possibly replacing Group I grades in certain applications. A 3,500-metric ton parcel of base oils was mentioned for possible shipment from Onsan. South Korea, to Huizhou in early May. A 1,000-ton cargo was likely to be shipped from Onsan to Tianjin the first week of May as well.

A number of base oil facilities in China were heard to be running at reduced rates or were shut down for maintenance, leading to tighter conditions, particularly of the heavy grades. However, this has also coincided with a period of lackluster demand from downstream lubricant segments as many uncertainties had plagued key parts of the economy earlier in the year. But there were signs that the Chinese economy was on track to gain momentum, particularly as industrial production was concerned, and this might result in increased demand from industrial lubricant applications.

Group II grades were generally tight in China, but prospects of a slowdown in various downstream segments were keeping buyers from trying to build inventories. Group III supplies could potentially become more abundant in the coming weeks as a Middle East producer was hoping to expand its market share in China and was planning to ship increased volumes to that country, as well as offer competitive pricing.

In Taiwan, Formosa Petrochemical was expected to ramp up production rates following a partial shutdown at the Group II plant in Mailiao caused by upstream maintenance at the affiliated refinery. Spot supplies from the producer were likely to become more plentiful once the refinery maintenance is completed in late April or early May.

Group III spot prices remained under pressure due to lackluster regional demand and expectations of lengthening supply. In South Korea, Group III producer SK Enmove was anticipated to complete a routine turnaround at its Group III units in Ulsan by the end of the week. The plant was shut down on March 13, but the company has been able to meet term requirements as it had built stocks ahead of the turnaround and has continuous production at other sites, although the shutdown was expected to tighten short-term inventory.

The SK-Pertamina Group III plant in Dumai, Indonesia, was expected to start a scheduled turnaround in May, but once again, this was not anticipated to have a significant impact on supplies as the producer was building inventories to cover commitments during the outage. The SK Enmove plant in Cartagena, Spain, will undergo a turnaround during the second half of the year. The maintenance programs should help the producer keep balanced inventories.

Once the Group III plants complete their shutdowns in South Korea and Indonesia, supply of Group III grades was anticipated to become more plentiful in the region. A second South Korean Group III producer, S-Oil, has scheduled a turnaround at its Onsan plant in September and October, and will build inventories ahead of the outage. Asian Group III spot supplies might tighten again at that point.

Snug availability of Group I supply in India was supporting slightly higher prices, particularly for the heavy-viscosity grades and bright stock. By contrast, increased availability of Group II and Group III cuts was having a softening effect on pricing. Buyers have adopted a more cautious attitude in terms of how much base stock to acquire as crude oil prices showed some volatility over the last few days. Some segments of the market were also in a holding pattern as the country’s general elections – which last several weeks – kicked off last Friday. “Narendra Modi, who has been prime minister since 2014, is seen as a market-friendly candidate. Under his leadership, India became the world’s fifth-largest economy with a GDP of $3.7 trillion and is now aiming to become the world’s third largest by 2027,” CNBC.com reported.

The upcoming arrival of imports from the U.S., the Middle East and Northeast Asia was anticipated to maintain downward pressure on prices in India over the coming weeks. A 6,000-ton lot was mentioned for late April and early May, lifting from Houston, United States, to Mumbai. A 10,000-ton cargo was being discussed for shipment from Ruwais, United Arab Emirates, to West Coast India or Amsterdam-Rotterdam-Antwerp at the end of May. A 7,000-ton lot was also on the table for shipment from Mailiao, Taiwan, to WCI or Hamriyah, U.A.E., in early June. A 5,000-ton parcel was mentioned for possible shipment from Rayong, Thailand, to Mumbai the first week of June. A 4,000-ton cargo was quoted for lifting in Daesan and Pyongtaek, South Korea, to Chennai in the second half of May.

Steeper crude oil and feedstock prices were placing upward pressure on base oil values in Asia. On April 4, Brent crude futures hit levels around $90 a barrel for the first time since October on heightened geopolitical risks. The ongoing Russian war on Ukraine, the Israel-Hamas war and tensions between Israel and Iran, and strong global demand have propelled oil prices to their highest level in months.

Crude oil futures advanced in the early part of the week on increased tensions between Israel and Iran but edged down on Thursday following reports of slower than expected economic growth in the United States during the first quarter, fanning concerns about softening fuel demand.

On Thursday, April 25, Brent June 2024 crude futures were trading at $87.96 per barrel on the London-based ICE Futures Europe exchange, from $87/bbl on April 18.

Dubai front month crude oil (Platts) financial futures for May 2024 settled at $86.95 per barrel on the CME on April 24, from $86.59/bbl on April 17.

Refiners favored the production of base oils over that of distillates as margins remained more favorable, and this may lead to a lengthening of base oil availability in the coming months. Additionally, the restart of base oil plants following turnarounds was expected to result in increased spot supplies.

Base oil spot prices in Asia were steady-to-firm again this week, with prices for some grades inching 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 slightly mixed. The Group I solvent neutral 150 grade was higher by $10/t at $900/t-$940/t, but the SN500 was unchanged at $1,030/t-$1,070/t. Bright stock slipped by $10/t from a week ago to $1,290/t-$1,320/t, all ex-tank Singapore.

Prices for the Group II 150 neutral was hovering at $980/t-$1,010/t and the 500N moved up by $10/t to $1,090/t-$1,130/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 edged up by $10/t to $770/t-$810/t, but the SN500 was holding at $910/t-$930/t. Bright stock prices were steady at $1,100/t-1,140/t, FOB Asia on tight supply.

The Group II 150N was unchanged from the previous week at $840/t-$890/t FOB Asia, but the 500N was up by $10/t at the low end of the range at $940/t-$980/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were steady-to-firm. The 4 cSt grade was assessed at $1,090-$1,120/t, and the 6 cSt was heard at $1,080/t-$1,120/t. The 8 cSt cut was assessed up by $10/t at $990-$1,030/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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