Asia Base Oil Price Report

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Some base oil prices continued to show signs of strengthening, propelled by steady demand and tightening supplies, while others remained on a downward spiral given ample availability and sluggish buying interest. Higher crude oil and feedstock prices were offering support to pricing, although upstream price fluctuations are generally not reflected in base oil pricing overnight. Market activity in a few countries was expected to pick up next week following the Lunar New Year celebrations.

Crude oil futures had climbed early in the week on fears about a possible escalation of conflicts in the Middle East, but fell on Thursday after a larger-than-expected build in United States crude inventories. The reports fanned concerns about demand in the world’s largest economy as refining utilization rates have dropped to their lowest levels since December 2022, according to Reuters. OPEC members plan to meet in March to decide whether to extend supply curbs into the second quarter, depending on demand prospects at that juncture. 

On Thursday, Feb. 15, Brent April 2024 crude futures were trading at $80.98 per barrel on the London-based ICE Futures Europe exchange, from $79.54/bbl on Feb. 8.

Dubai front month crude oil (Platts) financial futures for March 2024 settled at $80.48 per barrel on the CME on Feb. 14, from $78.56/bbl on Feb. 7.

While base oil demand has not yet shown considerable growth ahead of the spring production season, supply in some segments of the market was anticipated to tighten given planned and unplanned production outages.

In the API Group I category, a turnaround at the IRPC base oil plant in Rayong, Thailand, that started in early January was understood to have been completed, but it resulted in reduced regional availability of Group I base oils. A second Thai producer, which had experienced production issues since last December but seemed to be currently running its plant, was anticipated to be able to offer limited spot cargoes this month as it prioritized domestic demand. An Indonesian producer had also curbed spot supplies to focus on domestic requirements, but it may be able to offer more products for export in the coming weeks.

Japanese spot exports of Group I base oils have also been curbed because a key supplier has prioritized domestic product needs. Production capacity in Japan has been significantly reduced after the permanent closure of two ENEOS Group I plants since 2022, although the products from these units were mostly used for domestic production of lubricants and not exported.

Given limited availability of most Group I grades, with bright stock commanding much attention in the region, prices have either remained stable or have edged up over the last several weeks. However, the light grade SN150 was under some pressure due to adequate availability, and bids and offers have slipped as a result.

Group II base oils appeared to be more ample than Group I, but increased buying interest from those buyers who are able to replace Group I grades with Group II cuts in their formulations has tightened the supply and demand ratio. Additionally, reduced rates at a Group II facility, a turnaround at a Group II and Group III plant and an unexpected shutdown at another unit led to a tightening of availability.

The Hyundai-Shell Base Oils Group II plant in Daesan, South Korea, was expected to run at reduced rates for most of the month due to maintenance at the associated refinery. One of the main receivers of Group II base oils from this plant is China, and the reduced output has coincided with lower requirements in that country during the Lunar New Year holidays.

Formosa Petrochemical’s Group II plant in Mailiao, Taiwan, suffered an unexpected production outage caused by a fire that broke out at the affiliated refinery on Jan. 24, which forced the producer to shut down the base oils plant for several days. The unit was heard to have been restarted, and shipments were expected to resume following the Lunar New Year holidays celebrated Feb. 8-14 in Taiwan. Formosa typically ships large amounts to China and also offers spot cargoes, but the producer was expected to limit spot shipments while it rebuilt inventories. Furthermore, upcoming maintenance at upstream units in March may affect base oil production. Nevertheless, a Taiwanese 3,000-metric ton cargo was expected to be shipped to the United Arab Emirates in the first half of March.

The Petronas Group II and Group III refinery in Melaka, Malaysia, was heard to have started a maintenance program in late January that will be completed in early March.

Group III cargoes appeared to be plentiful on a global scale, and this continued to place pressure on pricing. However, upcoming plant turnarounds in Europe and Asia were expected to put a crimp in supplies.

SK Enmove was expected to take its two Group III units off-line in Ulsan, South Korea, in mid-March and was heard to be building inventories and restricting spot sales to meet contractual obligations during the outage.

In China, interest for imports had been lackluster ahead of the Lunar New Year or Spring Festival celebrations, which officially started on Feb. 10, but had already impacted trading and transportation in the days leading up to the holidays. Millions of travelers take to the road during the holidays to visit relatives in their hometowns. Last week, travel was disrupted in many areas by heavy snowfall and freezing temperatures.

Most buyers preferred to meet product requirements through domestic supplies, but some grades are chronically short in China, such as the heavy Group I grades and bright stock. This makes it necessary for importers to obtain cargoes from Southeast Asia mainly, but sometimes from other origins such as Europe as well. There was also appetite for Group III grades offered by a distributor of Middle East material, who has lowered offers to compete with locally-produced base stocks. Buying interest was anticipated to ramp up after the festivities next week. A couple of base oil cargoes were under discussion this week, with a 7,400-ton lot mentioned for possible shipment from Daesan, South Korea, to South China in the first half of March.

In India, similar trends to those seen in other parts of Asia prevailed, with Group I and Group II prices moving up, and Group III values mostly losing ground, with the exception of the 8 centiStoke, which edged up slightly on renewed buying interest.

Group I and Group II discussions centered on numbers inching up by $5 per metric ton to $10/ton on a CFR India basis as availability of most grades has tightened. Bright stock was especially being sought after and prices have seen $10/ton upward revisions. Both imports and domestic supplies of Group I grades were deemed snug and local suppliers were adamant about maintaining prices stable.

While negotiations for Group II cargoes from South Korea were somewhat muted on account of tighter supplies and increased price indications, discussions involving U.S. cargoes seemed to have gained momentum, as there was a product overhang in that country and producers were looking for export opportunities to keep inventories in check. A 10,000-ton lot was mentioned for prompt shipment from the U.S. Gulf to India. About 5,000 tons to 7,000 tons were expected to be lifted in Houston, Texas, to Mumbai, India, in the first half of February. Details emerged on a 6,000-ton cargo having been lifted in Houston for Mumbai last December and a 5,500-ton parcel having been shipped from Pascagoula, Mississippi, to Mumbai in late December as well. In terms of South Korean shipments, a 10,000-ton lot was mentioned for prompt shipment to West Coast India this week. An 11,500-ton lot was expected to have been shipped from Ulsan to Mumbai in late January. A 10,000-12,000-ton lot was quoted for shipment from Ras Laffan, Qatar, to West Coast India at the end of February.

Additionally, a 5,500-ton cargo was expected to be shipped from Singapore to Karachi, Pakistan, in late February. About 600 tons were anticipated to be lifted from Singapore to Map Ta Phut, Thailand, the first week of March.

A 1,000-ton parcel was discussed for shipment from Onsan, South Korea, to Ho Chi Minh, Vietnam, in early March, and a 2,400-ton lot was on the table for lifting in Yeosu, South Korea, to Tanjung Priok and Merak, Indonesia, in the first half of March.

Base oil prices in Asia were mixed compared to the previous week. Some prices slipped due to plentiful availability and lukewarm demand, some were steady, and others inched up on tightening conditions. 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 firm from the previous week. The Group I solvent neutral 150 grade was unchanged at $870/t-$910/t, but the SN500 edged up by $10/t to $1,000/t-$1,030/t. Bright stock also climbed by $10/t to $1,210/t-$1,250/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were holding at $950/t-$980/t, but the 500N moved up by $10/t to $990/t-$1,030/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was adjusted down by $10/t to better reflect current discussions at $760/t-$800/t, while the SN500 was assessed unchanged at $890/t-$920/t. Bright stock prices were higher by $10/t at $1,070/t-1,110/t, FOB Asia on tight supply.

The Group II 150N edged up by $10/t to $790/t-$830/t FOB Asia, and the 500N was assessed higher by $10-$20/t at $830/t-$870/t FOB Asia.

In the Group III segment, 4 cSt, 6 cSt and 8 cSt prices were steady to softer. The 4 cSt fell by $20/t to $1,090-$1,120/t, and the 6 cSt declined by $10/t to $1,110/t-$1,150/t. The 8 cSt grade was unchanged at $930-$970/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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