Both buyers and sellers had been intent of managing inventories carefully ahead of Dec. 31 to avoid tax repercussions and a large product overhang at the start of the year. Most suppliers had done a good job of finding takers for their spot cargoes, with shipments having been placed in Asia along with Europe and the Americas.

Details about several shipping inquiries and fixtures emerged during the week, reflecting the verve with which suppliers had tried to find a home for their base oil barrels. About 12,000 metric tons were understood to have been booked from Pyongtaek and Daesan, South Korea, to Mumbai and Kandla, India, in early December. A 2,000-metric ton base oils cargo was discussed to ship from Pyongtaek, South Korea, to Chennai, India, in the first half of January. Close to 3,000 metric tons were on the table for shipment from South Korea to Ecuador in the second half of January. A 9,400-metric ton cargo was expected to move from Singapore to Zhuhai and Tianjin, China, in early January. Another 8,500 metric tons were expected to be shipped from Singapore to Tianjin the first week of January as well. Near 10,000 metric tons of base oils and other chemicals were discussed for shipment from Singapore to various Indian ports in the second half of January. An 8,500-metric ton parcel of three base oil grades was heard to have been booked from Wakayama, Japan, to Singapore for early January lifting.

While there had been talk about lengthening supplies of API Group I bright stock and Group II heavy grades – with these cuts being exposed to most of the downward pressure – a pickup in demand was expected at the start of the year as buyers typically need to replenish stocks ahead of the busier spring season. The celebration of the Lunar New Year in China and many Asian countries in early February was also expected to encourage consumers to start securing cargoes in the first few weeks of 2022 as prices sometimes tick up when participants return to business after the Lunar New Year.

Another factor that was thought to be pushing buyers to acquire fresh volumes was that after the experience of early 2021, when supply had turned extremely tight and prices had skyrocketed, many did not want to be caught with no product at all and preferred to carry slightly more inventory than usual.

Buyers in key markets such as India and China had been holding off on purchases awaiting prices to bottom out, but many speculated that values were close to that point. The last business done in those markets reflected fairly unchanged numbers compared to previous transactions. Indian buyers also appeared comfortable with current and imminent arrivals of product from the United States, South Korea, Taiwan and the Middle East and did not feel rushed to secure more cargoes right away, although demand does tend to pick up in the first part of the year. There were plenty of competitively-priced cargoes from domestic producers in India as well. Likewise, China was expected to receive material from Southeast Asia, Taiwan and South Korea, and had ample supplies from local refiners.

The spread of the new coronavirus variant, Omicron, has had less of an impact on activities in Asia than in Europe and the United States, where the number of infections has spiked. Asian governments have implemented various restrictions, which in some cases have led to curbs on tourism and the population’s mobility. This, in turn, may affect demand for transportation fuels and lead to reduced refinery operating rates down the road, as had been the case when the pandemic first started.

It was not clear whether any refiners had already trimmed run rates, although it did seem that base oil supply was not as abundant as expected at this time of the year. This situation may be the result of already reduced production rates at some facilities. At the same time, there were reports that due to the slide in gasoil prices, many refiners favored the production of light viscosity base oils to the detriment of gasoil output.

Another consequence of the rapid spread of the Omicron variant was that transportation and logistics were being impacted by a lack of truck, ship and port personnel as many employees became infected or preferred to look for other job opportunities, while some vessels got stuck in one region and were unable to leave because of quarantine measures and border restrictions. Climbing freight rates were also discouraging inter-regional transactions.

As mentioned above, Asian spot base oil prices were assessed as steady this week on muted trading and a lack of reported deals. The spot ranges portrayed below have been left unchanged week-on-week to reflect last-done business, discussions and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were assessed as steady. The Group I solvent neutral 150 grade was holding at $840/t-$870/t, and the SN500 at $1,020/t-$1,060/t. Bright stock was hovering at $1,200/t-$1,240/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were stable at $870/t-$910/t, while the 500N was assessed at $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 gauged at $900/t-$940/t. Bright stock was holding at $990/t-1,030/t, FOB Asia.

The Group II 150N was stable at $770/t-$810/t FOB Asia, and the 500N and 600N cuts were near $850/t-$890/t, FOB Asia.

In the Group III segment, prices were also generally 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 slipped on Thursday after China, the world’s largest importer, reduced its first crude import allocations for 2022, overshadowing the impact of U.S. data showing that fuel demand had held up despite soaring Omicron infections, Reuters reported.

On Dec. 30, Brent February futures were trading at $78.66 per barrel on the London-based ICE Futures Europe exchange, from $75.36/bbl on Dec. 23.

Dubai front month crude oil (Platts) financial futures for January settled at $76.98/bbl on the CME on Dec. 29, from $73.30/bbl on Dec. 22. (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.

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