Asia Base Oil Price Report

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The approach of the end of the year – which is widely celebrated in Asia as a major holiday, with participants taking time off from work – and the uncertainties related to the surge in Omicron coronavirus cases led to slightly subdued trading, although several export transactions were finalized during the week.

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Many Asian nations have started to implement new COVID-19-related restrictions, such as halting the sales of airline tickets, entry bans and stricter quarantine rules, while at the same time, their governments were focusing on trying to improve the economy, which has been hard-hit by the pandemic. The spread of the Omicron variant was expected to derail some of these initiatives.

Base oil producers have made concerted efforts to reduce inventories before December 31 to avoid tax repercussions, and seem to have been fairly successful, as stocks were said to be at manageable levels for many suppliers. This has also helped attenuate the downward trend that has affected spot prices over the last three months.

Several shipping inquiries surfaced during the week, pointing to the fact that suppliers had been hard at work trying to finalize export deals that allowed them to attain more balanced supply positions over the next few weeks.

South Korean suppliers appeared to have been particularly busy, with several cargoes being discussed, including a 4,700-metric ton lot for shipment from Yeosu to Bangkok, Thailand, in late January and a 3,000-ton lot also from Yeosu to Rugao, China, in the first half of January. Additionally, two separate base oil cargoes were expected to ship from Yeosu to Tianjin, China, and one from Onsan to Tianjin in early January. A 1,400-ton parcel of two base oil grades was also on the table to move from Onsan to Huizhou, China, and a 900-ton cargo from Onsan to Bangkok the first week of January. It was also heard that about 10,000 tons had been shipped from Pyeongtaek, South Korea, to Los Angeles, United States, in late November.

There was a 5,000-ton parcel that was expected to be shipped from Dalian, China, to West Coast India in January. Exports from China have generally become more rare over the last couple of months, while imports had picked up the pace for a while, but seemed to have slowed down again. This was partly due to buyers’ concern that prices had not bottomed out yet and they preferred to wait a little longer, as they were not in urgent need for product. Uncertainties surrounding the Chinese economy was dampening the eagerness to acquire large cargoes as it was not clear whether lubricant demand would be as strong as expected following the Lunar New Year holidays, which start on Feb. 1, 2022.

Chinese importers were likely to reappear on the trading scene before the end of the year as many buyers start to prepare inventories ahead of the Lunar New Year celebrations. The Chinese officially get seven days off, from Jan. 31 until Feb. 6, but the celebrations culminate with the Lantern Festival on Feb. 15. This means that trading for a large part of the month of February is likely to be subdued, but market activity was likely to resume in the second half of February and remain hectic for a few weeks during the spring production cycle.

While a couple of cargoes were looking at moving from South Korea to India, several parcels were also understood to have been lined up from Taiwan, the Middle East and the United States to India in Dec. and Jan. A 5,000-7,000-ton parcel was likely to be shipped from Mailiao, Taiwan, to Mumbai in the second half of January. It was heard that almost 30,000 metric tons had been booked from the U.S. to India for December and January lifting. The prospect of the arrival of these base oil cargoes has allowed Indian buyers to be more patient in terms of purchases and prices, as they could afford to wait and achieve lower pricing. As a result, CFR India indications for API Group II grades were heard to have softened at $10 per metric ton to $50/ton from the previous week.

Meanwhile, base oil demand in Southeast Asia was deemed steady, while Group I availability from Southeast Asian producers was plentiful. A Singapore-based producer adjusted its Group II heavy grade ex-tank prices down. A Group I producer appeared to have faced some challenges in placing bright stock cargoes, as buying interest was lukewarm. At the same time, availability of Group I grades from Japan was heard to have been reduced as producers have trimmed refinery operating rates given a drop in consumption of refined products.

Asian spot base oil prices were a mixed bag this week, with some grades slipping, some remaining steady and others increasing slightly on renewed buying interest. 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 moved in various directions this week. The Group I solvent neutral 150 grade was steady at $840/t-$870/t, but the SN500 was higher by $10/t at $1,020/t-$1,060/t. Bright stock, on the other hand, moved down by $20/t to $1,200/t-$1,240/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were steady at $870/t-$910/t, while the 500N dropped by $20/t to $1,120/t-$1,160/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $730/t-$770/t, and the SN500 was assessed higher by $30/t at $900/t-$940/t. Bright stock continued on a downward trend and was down by $30/t at $990/t-1,030/t, FOB Asia.

The Group II 150N was assessed steady at $770/t-$810/t FOB Asia, but the 500N and 600N cuts slumped by $50/t to $850/t-$890/t, FOB Asia.

In the Group III segment, prices were stable. The 4 centiStoke was holding at $1,440-$1,480/t, and the 6 cSt was unchanged at $1,420/t-$1,460/t. The 8 cSt grade was hovering at $1,180-$1,220/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures strengthened earlier in the week on reports of declining U.S. inventories, but edged down on Thursday as countries imposed new travel curbs to limit the spread of the coronavirus, which meant that fuel demand might suffer. However, reports that the Omicron variant was less likely to cause as many hospitalizations as the previous variants lent a more positive note to trading.

On Dec. 23, Brent February futures were trading at $75.36 per barrel on the London-based ICE Futures Europe exchange, from $74.60/bbl on Dec. 16.

Dubai front month crude oil (Platts) financial futures for January settled at $73.30/bbl on the CME on Dec. 22, from $71.52/bbl on Dec. 15. (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.

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