Weekly Asia Base Oil Price Report

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Lengthening availability of most base oil grades against shrinking demand continued to place pressure on prices in Asia, with some spot indications edging down from a week ago. However, a tighter supply and demand balance in some pockets of the market allowed a few cuts to maintain a steady course. Crude oil price volatility added a layer of uncertainty to business, and buyers preferred to wait for more definitive price direction.

Crude oil prices have recovered after losing some territory earlier in the month. Brent futures had slipped to below $80 per barrel during the first week of June, but have climbed to above $85/bbl. On Thursday, Brent futures edged up as a cooling jobs market in the United States fueled hopes that the U.S. Federal Reserve would cut interest rates.

On Thursday, June 20, Brent August 2024 crude futures were trading at $85.51 per barrel on the London-based ICE Futures Europe exchange, from $82.75 on June 13 and $79.99/bbl on June 6.

Dubai front month crude oil (Platts) financial futures for July 2024 settled at $84.31 per barrel on the CME on June 18, from $82.31/bbl on June 12 and $78.25/bbl on June 5. (There was no posting on the CME on June 19 due to the Juneteenth holiday in the U.S.)

The slowing base oil demand was partly the result of seasonal patterns, since consumption in many countries contracts during the rainy season, as is the case in India.

Indian buyers generally prefer to build inventories ahead of the start of the monsoon season in June because the heavy rains cause flooding in many areas of the country, along with logistics and transportation disruptions. This is one of the reasons buying interest for imports has weakened. The plentiful availability of competitively priced domestic base oils also encouraged some buyers to secure material from local refiners, who enjoyed the advantage of being able to obtain discounted Russian crude oil to run their plants.

Base oil prices were generally under downward pressure in India as supplies were plentiful and requirements were less buoyant than during the previous two months. The availability of API Group I and Group II imports has tightened because fewer transactions have been concluded due to reduced buying interest and lower bids.

Group I prices were heard to have edged down by $10 per metric ton to $20/ton on a CFR India basis as sellers tried to entice buyers, but they have seen lackluster interest because most buyers have already covered product needs or prefer to wait and see if prices fall further. Local products have also been offered at competitive prices.

Similarly, the Group II base oils attracted few buyers as many have already adequate volumes to cover immediate needs and were not interested in holding extra stocks. A snug Group II supply scenario in exporting countries such as the U.S. also limited business, because buyers and sellers there were building inventories in case of severe weather and output disruptions during the hurricane season. In a similar fashion to the Group I cuts, CFR India prices for Group II base oils have slipped by around $10-$15/bbl. However, a turnaround at an Indian Group II plant that was expected to have started in mid-June and would likely reduce domestic Group II volumes.

Demand for the Group III grades was steady in India, fueled by the automotive industry as more stringent emissions rules force lubricant manufacturers to use high performance base oils. The upcoming turnaround at the Indonesian Group III plant in July may limit the availability of Group III grades and offered some support to pricing.

There was mention of a large cargo of 30,000 tons to 40,000 tons to be loaded in Yeosu, South Korea, to Mumbai in the first half of July. Also during the first part of next month, a 2,200-ton parcel may be shipped from Ulsan, South Korea, to Karachi, Pakistan.

Buying interest in imports was also muted in China, as inventories were considered sufficient to cover product demand and buyers preferred to delay purchases in hopes that prices would fall given lackluster consumption and increasing supply levels. Congestion at various ports in the region and steeper freight rates also discouraged some of the negotiations that had surfaced earlier in the month.

In terms of Group I availability, there has been an Indonesian tender and a Japanese offer of Group I cargoes, but Chinese buying interest appeared lukewarm at best. The heavier grades continued to attract the most attention because China has a structural deficit of the heavier viscosities. However, even demand for bright stock has declined along with the other grades due to lackluster lubricant consumption levels.

Buying appetite for Group II grades has not been stellar either, and despite efforts by the sole Taiwanese Group II supplier to neutralize a newly reimposed Chinese tax on Taiwanese base oil exports by lowering its term prices to China, volumes shipped to that country have fallen. As is the case with India, lower-priced Chinese material competed with imports as well.

There continued to be competition among Group III suppliers to maintain or gain market share in China, with a local producer reducing prices to attract new business.

Supplies of Group III base oils were expected to lengthen in Asia as demand has started to slow down and the recent completion of turnaround of the SK Enmove plant in South Korea in early May was anticipated to lead to additional availabilities. However, a turnaround at the SK-Pertamina plant in Dumai, Indonesia, that was originally scheduled for May, was heard to have been postponed to July, and will likely reduce regional short-term Group III inventories. The producer was expected to build inventories to cover term requirements, but spot cargoes will be more limited. Later in the year, S-Oil has scheduled a turnaround at its Onsan plant in September and October which might affect Group II and Group III availability, but the producer was expected to build inventories to cover contractual obligations.

Base oil spot prices in Asia were steady-to-lower, with indications for some grades edging down due to softening demand and growing inventories. 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-softer. The Group I solvent neutral 150 grade was steady at $890/t-$930/t, and the SN500 was also unchanged at  $1,050/t-$1,090/t. Bright stock edged down by $10/t at the low end of the range to $1,280/t-$1,320/t, all ex-tank Singapore.

Prices for the Group II 150 neutral slipped by $10/t to $990/t-$1,020/t, and the 500N also edged down by $10/t to $1,100/t-$1,140/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 were assessed down by $10/t at $760/t-$800/t, but the SN500 was unchanged at $930/t-$950/t. Bright stock prices fell by $20/t to $1,080/t-$1,120/t, FOB Asia.

The Group II 150N moved down by $10/t to $850/t-$890/t FOB Asia, and the 500N was assessed down by $10/t as well at $950/t-$990/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were unchanged week on week. The 4 cSt grade was assessed at $1,100-$1,140/t, and the 6 cSt was hovering at $1,110/t-$1,150/t. The 8 cSt cut was holding 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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