Asia Base Oil Price Report

Share

Base oil markets in Asia displayed typical characteristics ahead of the year-end holidays, with demand slowing down, supply becoming more plentiful and spot prices weakening for most grades. The detection of the Omicron variant of the coronavirus in more countries dampened activity further, as uncertainties continued to weigh on consumers’ buying interest.

While spot business was somewhat muted during the week, buyers appeared happy to take as much product under term contracts as possible, likely to avoid exposure to potential product shortages or logistical issues in coming weeks. This was a significant change in Asia, where the spot market is typically very active and large volumes change hands under spot conditions.

Get alerts when new Sustainability Blog articles are available.

Loading

After the nightmarish logistical difficulties experienced by buyers and sellers during great part of the year – with vessel space becoming very limited and freight prices skyrocketing – many buyers were opting for a more risk-averse way of conducting business. As a result of buyers taking more volumes under contract, spot availability was said to be less plentiful.

This trend was also evident at other product sources such as the United States, which typically has large amounts of product for export at the end of the year. While several cargoes have been booked to India and other destinations in recent months, the number of cargoes was smaller compared to years past. This condition was partly attributed to prices, but also to the fact that  U.S. suppliers did not have an overabundance of product.

In China, buying interest for imports has been lukewarm due to the presence of plentiful domestic supply at competitive prices. The lighter grades were readily available, although supply was tighter as these cuts are used in more applications during the winter months than the heavier grades. Chinese buyers have also shown restrained appetite for bright stock, in sharp contract with earlier in the year when buyers were eager to obtain cargoes, particularly in Southeast Asia, and prices had steadily moved up. At the moment, there appeared to be ample availability of bright stock and heavy grades in Southeast Asia with few takers in sight. Aside from seasonal patterns, the abundant supply was also attributed to most base stock plants running at close to full rates, versus earlier in the year, when units in Southeast Asia and Japan had undergone turnarounds.

The completion of an extended turnaround at Taiwanese producer Formosa Petrochemical’s plant has also allowed for more copious supplies of Group II grades moving to China and India during November.

Meanwhile, a partial shutdown at a South Korean Group II and Group III plant due to a technical issue appeared to be affecting only the production of the Group II 600 neutral cut. It was heard that the production train would be running at reduced rates from October until the end of December.

A second South Korean Group II and Group III producer was heard to have slated a turnaround in April 2022, but this could not be confirmed with the producer directly.

A couple of South Korean cargoes were heard to be either on their way or have arrived in China, with a 1,750 metric ton parcel being discussed for shipment to China is second half of December. Additionally, South Korean material was expected to move to India this month, along with shipments from the U.S., the Middle East and Spain. Demand in India has been more robust than anticipated, although it showed a slowdown on uncertainties brought on by news of the Omicron variant, as buyers became more cautious in terms of securing cargoes. They preferred to purchase smaller volumes under term contract in case base oil demand from the lubricants segment slumped and prices declined as well.

Indian buyers felt confident that there was plentiful availability of most grades, both from domestic suppliers – who have lowered most of their prices, with the exception of the light grades – as well as imports, and did not feel pressured to commit to deep-sea cargoes that may take some time to arrive. There was also less interest to secure very light cargoes in view of the drop in diesel prices about a month ago.

Generally speaking, spot base oil prices were steady to soft this week in Asia, with each grade affected by different fundamentals. The spot ranges portrayed below have been revised to reflect bids and offers, deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were largely lower on lengthening supply and a push to lower inventories at the end of the year. The Group I solvent neutral 150 grade fell by $30/t to $840/t-$870/t, and the SN500 was lower by $10/t at $1,010/t-$1,050/t. Bright stock was also assessed down by $10/t at $1,240/t-$1,280/t, all ex-tank Singapore.

Prices for the Group II 150 neutral edged down by $20/t to $890/t-$930/t, while the 500N dropped by $40/t to $1,180/t-$1,220/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was lower by $20/t at $750/t-$790/t, and the SN500 was holding at $880/t-$920/t. Bright stock was assessed down by $30/t at $1,060/t-1,100/t, FOB Asia.

The Group II 150N was heard to have moved down by $20/t to $780/t-$820/t FOB Asia, but the 500N and 600N cuts were down by $30/t at $930/t-$970/t, FOB Asia.

In the Group III segment, prices were stable to soft, with the 8 cSt continuing to face downward pressure on ample supply and lackluster demand. The 4 centiStoke was holding at $1,440-$1,480/t, but the 6 cSt was down by $10/t at $1,420/t-$1,460/t. The 8 cSt grade was assessed lower by $30/t at $1,190-1,230/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures prolonged a climbing streak on Thursday, marking a fourth straight day of gains, on reports that Omicron was likely more contagious than the Delta variant, but caused milder symptoms. A lower-than-expected fall in U.S. crude oil stocks did not have a significant effect on futures.

On Dec. 9, Brent February futures were trading at $75.16 per barrel on the London-based ICE Futures Europe exchange, from $70.64/bbl on Dec. 2.

Dubai front month crude oil (Platts) financial futures for January settled at $73.46/bbl on the CME on Dec. 1, from $66.69/bbl trades on Nov. 23 (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)

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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

Historic and current base oil pricing data are available for purchase in Excel format.

Related Topics

Base Oil Pricing Report    Base Stocks    Market Topics    Other