Weekly Asia Base Oil Price Report

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Slowing demand and high operating rates at most base oil plants – with the exception perhaps of China – led to oversupply conditions in some segments of the market, while other sectors were still tight because of limited production and steady consumption.

Participants were monitoring crude oil and feedstock values as climbing figures were exerting pressure on base oil prices, offsetting some of the softening from lengthening supply.

Crude oil futures showed volatility early in the week on fears that Hurricane Beryl, which was barreling towards Jamaica, would impact offshore oil production in the northern Gulf of Mexico. However, futures slipped on Tuesday as the storm lost strength and was not expected to affect oil production.

Oil futures then moved up on Wednesday after the U.S. Energy Information Administration reported a significant inventory decline of 12.2 million barrels for the week to June 28. Prices were also propped up by geopolitical concerns as analysts worried about a further escalation of violence in the Middle East given Israel’s continued bombing of Gaza.

On the same day, Brent September 2024 crude futures were trading at $86.92 per barrel on the London-based ICE Futures Europe exchange, up from $86.25 for August futures on June 27.

Dubai front month crude oil (Platts) financial futures for August 2024 settled at $85.45 per barrel on the CME on July 2, from $84.62/bbl for July futures on June 26.

Demand for most API Group I grades was healthy, supporting steady prices. Bright stock appeared to be the star of the show, with requirements outpacing availability of spot cargoes, driving prices up in the region.

Bright stock demand was expected to remain robust in China in the coming years because of its applications in the marine, railway, industrial and heavy-duty transportation segments. Several Group I plants have been shuttered over the past 10 years – most recently, two Eneos plants in Japan – and availability of this grade has therefore been tight in Asia. Most of the imported Group I cargoes moving to China are from Southeast Asia, and spot availability has remained limited, placing upward pressure on pricing, particularly for Thai material.

There are no plans to build new Group I facilities in China, but there will be an expansion at the PetroChina Fushun Group I plant, which currently has Group I capacity of 260,000 metric tons per year and is scheduled to start up an additional 70,000 tons/year of Group I capacity in the third quarter of 2024. The added capacity will only be for bright stock, a speaker said during the ICIS Asian Base Oils and Lubricants Conference in Singapore at the end of June.

Availability of Group II grades has lengthened as consumption was lackluster and supplies were accumulating, thanks to most plants running at top rates. More attractive base oil margins against competing distillates such as gasoil meant that refiners were likely to continue running facilities at high rates and supply would remain plentiful.

Not many Group II transactions were taking place as buyers held off on purchases in hopes of lower pricing, leading bids and offers to slip week on week. Even so, it was difficult to conclude business because buyers preferred to wait and see if prices fell further.

In China, imported Group II spot cargoes have become scarcer as the Taiwanese producer, Formosa Petrochemical, was expected to look for alternative outlets for its products given a newly re-imposed Chinese tariff of 6% on Taiwanese refined products, including base oils. The new tariff went into effect on June 15. A 3,000-metric-ton cargo was reportedly lined up for shipment from Mailiao to Chennai, India, in July. A 7,000-ton lot was on the table for shipment from Mailiao to Hamriyah, United Arab Emirates, in mid-July.

A couple of South Korean cargoes were expected to be shipped to China in early July, with a 500-ton parcel mentioned for shipment from Onsan to Zhangjiagang and a 2,300-ton lot expected to be loaded in Onsan for Jingjiang. A 1,300-ton cargo was also discussed for shipment from Onsan to Tianjin in late July.

India’s buying appetite for Group I remained steady and imports were scant, but domestic base oils appeared sufficient to meet most term needs. Import prices were reported as stable week-on-week on muted trade. Indian refiners continued to offer competitive prices on refined products because they can secure discounted Russian crude oil to run their refineries.

Group II availability was deemed more than adequate to cover requirements because buyers have built inventories before monsoon season in June and showed subdued interest in securing additional volumes. Competitively priced domestic products were exerting pressure on import indications, with prices on a CFR India basis edging down by $5 per metric ton from the previous week.

Group III suppliers have lifted their price expectations for July cargoes moving to India given more balanced supply and demand conditions, along with steeper crude oil values, with Group III spot prices inching up by $5/t-$10/t on a CFR India basis.

The turnaround at the SK-Pertamina plant in Dumai, Indonesia, which was originally scheduled for May and and postponed to July, has suffered a further postponement to August. The turnaround will reduce regional short-term Group III inventories, but the producer was expected to build inventories to cover term requirements. Later in the year, S-Oil has scheduled a turnaround at its Onsan plant in September or October, which might affect Group II and Group III availability. Again, the producer was expected to build inventories ahead of the outage.

Lengthening availability of base oils in Asia has prompted South Korean suppliers to look for opportunities in the Americas, although steep freight rates and logistical difficulties were hampering some of the transactions, according to sources. This week, it was heard that a 4,000-ton lubes cargo was being worked on for shipment from Ulsan to Houston in August. There was also interest to move cargoes to Brazil and the West Coast of South America. A 4,000-ton lot was quoted for shipment from South Korea to Callao, Peru, this month.

Several other South Korean cargoes were being discussed for July shipment to destinations in Asia and the Middle East, with two lots expected to be shipped from Onsan to Vietnam in the first half of July. A 1,600-ton cargo was anticipated to be shipped from Onsan to Merak, Indonesia, between July 5 and 10. An 8,000-ton lot was mentioned for lifting in Onsan to Hamriyah this month as well.

Base oil spot prices in Asia were steady-to-soft, with indications for Group II moving down on lengthening supplies and restrained buying interest. 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 stable-to-soft. The Group I solvent neutral 150 grade was steady at $890-930/t, and the SN500 was also unchanged at $1,050-1,090/t. Bright stock was holding at $1,280-1,320/t, all ex-tank Singapore.

Prices for the Group II 150 neutral slipped by $10/t to $980-1,010/t, and the 500N also edged down by $10/t to $1,080-1,120/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $760-800/t, and SN500 was hovering at $920-940/t. Bright stock prices were assessed at $1,070/t-1,110/t, FOB Asia.

The Group II 150N was lower by $20/t at $810-850/t FOB Asia, and the 500N was also assessed down by $20/t at $910-950/t FOB Asia.

In the Group III segment, 4, 6 and 8 centiStoke prices have stabilized after edging down last week. The 4 cSt grade was heard at $1,090-$1,130/t, and the 6 cSt was holding at $1,100-1,140/t. The 8 cSt cut was assessed 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.

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