Freight rates for products moving from Asia and the Middle East to Europe were understood to have jumped by as much as 50% and shipping times have also almost doubled as vessels needed to be rerouted around the southern tip of South Africa. Asian suppliers have therefore been looking for opportunities to ship material within the region and to the Americas as logistics were deemed less complicated, although vessel space was scarce because some ships were engaged on longer routes.

Crude oil futures were on the rise early in the week but slipped on Thursday after a larger-than-expected build in U.S. crude stockpiles fanned worries about a possible demand slowdown, while signs that U.S. interest rates could remain elevated until June added to pressure. The potential extension of voluntary oil output cuts from OPEC+ limited the price decline.

On Thursday, Feb. 29, Brent April 2024 crude futures were trading at $83.12 per barrel on the London-based ICE Futures Europe exchange, from $83.37/bbl on Feb. 22.

Dubai front month crude oil (Platts) financial futures for April 2024 settled at $81.05 per barrel on the CME on Feb. 28, from $81.76/bbl for March futures on Feb. 21.

Market players were keeping an eye on crude oil and gasoil prices as refiners might dial down base oil output if fuel prices move up and render higher margins, reducing base oil availability.

As has been the case over the last several weeks, API Group I grades remained generally tight due to recent plant shutdowns in Southeast Asia and the permanent closure of plants in Japan. Suppliers have raised offers and buyers seemed willing to acquiesce, particularly when it came down to bright stock as it is a difficult grade to replace and there are only a handful of suppliers who were offering cargoes. An Indonesian supplier was heard to have offered Group I grades through a tender, while small volumes were also available from Thailand. The light-viscosity grades were more abundant than their heavier counterparts, while competitive Group II prices also prompted blenders to switch base oil categories whenever possible.

A United States producer with production sites in Singapore was heard to have shipped API Group II cargoes to Europe to meet commitments there while its plant in Rotterdam, the Netherlands, completes a two-month turnaround which started in January. The producer’s supplies were tight system-wide, according to sources.

Group II base oils were mostly available, but supplies were somewhat reduced by a recent unplanned outage at Formosa Petrochemical’s Group II plant, following a fire at the associated refinery in January, and an ongoing partial shutdown at a South Korean refinery. Supply of the lighter grades was ample, but the heavier grades have tightened as these cuts are often in short supply in many countries such as China.

China and India regularly receive products from the Taiwanese facility, but spot shipments have recently been more restrained due to the production disruption in January and upcoming maintenance at the refinery, which will impact downstream operations, including the base oils unit. Nevertheless, an 11,000-metric ton cargo was ostensibly discussed for shipment from Mailiao, Taiwan, to Mumbai, India, in late March.

A number of cargoes were recently concluded for shipment from the U.S. to India as well, since there was a product overhang in the U.S. and suppliers had lowered prices to attract export business, but it was unclear whether there would be extra availability in March as the domestic market typically ramps up for the spring lubricant production cycle. A 7,000-ton to 8,000-ton parcel was likely to be lifted in Houston bound for West Coast India the first week of March.

Additionally, about 10,000 tons to 12,000 tons were expected to be shipped from Ras Laffan, Qatar, to WCI at the end of Feb. A 6,000-ton cargo was on the table for shipment from Antwerp, Belgium, to Mumbai during March 10-20. Between 12,000 tons and 14,000 tons of two base oil grades were anticipated to be shipped from Singapore to Mumbai and Karachi, Pakistan, at the end of March.

Indian buyers were seeking to replenish base oil stocks to ramp up lubricant production as finished products consumption typically increases ahead of the end of the fiscal year on March 31. Base oil prices for Group I and Group II grades in India were higher by $5 per metric ton to $15/t on a CFR basis due to tighter regional supplies and reduced domestic output given production issues at local plants. Group II availability was not as plentiful as earlier in the year, but several import cargoes were scheduled to arrive over the next few weeks. Group III base oils were ample and price ideas have therefore softened.

In China, demand has shown a small uptick, following the Lunar New Year or Spring Festival holidays in mid-February, but buyers were wary of securing too much product as forecasts were hazy. Demand was expected to take off in the automotive, industrial and agricultural segments as March got underway and activity starts to increase with the arrival of warmer weather but could be dampened by economic conditions in China over the next few months as many uncertainties lingered.

Buying appetite for imports of the heavier grades was likely to be more robust than for the lighter grades given that China is still structurally short on the heavy viscosities, despite additional base oil capacity added in recent years. However, competitive prices from domestic producers was dampening interest in imports, particularly for bright stock.

With some Chinese Group II plants slated to complete maintenance in March, buyers were expected to step back into the market and this renewed buying interest may offer support to Group II pricing.

A local Group III producer has improved the quality of its products and has offered competitive prices to gain market share, but demand for Group III cuts was lackluster as many blenders preferred to secure Group II grades at lower levels.

A 1,500-ton cargo of three base oil grades was expected to be shipped from Onsan, South Korea, to Tianjin in early March. A 2,300-ton parcel was also discussed for shipment from Onsan to Zhangjiagang on March 19-23.

Several South Korean cargoes were also discussed for shipment to various destinations in Asia, including a 1,000-ton lot for lifting in Ulsan and delivery in Singapore in March, and a 4,500-ton parcel for shipment from Yeosu to Bangkok, Thailand, at the end of March. A 6,000-ton cargo was also mentioned for possible shipment from Yeosu to Singapore in March and a 1,000-ton for Yeosu to Yokohama, Japan, in early April. A 3,500-ton cargo was also on the table for shipment from Onsan to Merak and Tanjung Priok, Indonesia, in March.

Regional supplies of Group III grades continued to outpace demand, placing downward pressure on prices, despite an ongoing Group III plant turnaround in Malaysia, and upcoming maintenance in South Korea.

The Petronas Group II and Group III refinery in Melaka, Malaysia, was heard to have started a maintenance program in late January that was expected to be completed in early March, although a large part of its output is used for the company’s own downstream operations and only limited volumes are sold on the spot market. Nevertheless, the producer was reportedly already offering small March spot cargoes.

SK Enmove planned 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.

There were also reports that the SK-Pertamina Group III plant in Dumai, Indonesia, would be undergoing a partial shutdown some time during the first or second quarter, but the effects were expected to be minimal as the producer will build inventories to cover commitments during the outage.

Base oil spot prices in Asia were again mixed this week, with some values declining due to ample availability and softer demand, some remaining steady, and others strengthening on tighter 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, and the SN500 was higher by $10/t at the top end of the range at $1,000/t-$1,040/t. Bright stock climbed by $20/t to $1,240/t-$1,280/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were up by $10/t at $960/t-$990/t, and the 500N moved up by $10/t as well to $1,010/t-$1,050/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was adjusted down by $10/t to $750/t-$790/t, while the SN500 was assessed unchanged at $880/t-$910/t. Bright stock prices were firm at $1,070/t-$1,110/t, FOB Asia on tight supply.

The Group II 150N inched up by $10/t to $800/t-$840/t FOB Asia, and the 500N was assessed higher by $20/t at $860/t-$900/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were steady to softer. The 4 cSt slipped by $10/t to $1,060-$1,090/t, and the 6 cSt also declined by $10/t to $1,080/t-$1,120/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.