Asia Base Oil Price Report

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Markets were convulsed by the sudden and sharp upsurge in crude oil prices as numerous countries imposed sanctions on Russian commercial transactions and the United States announced a ban on Russian crude oil, natural gas and coal imports in a bid to stop Russia President Vladimir Putin from continuing his unprovoked attacks on Ukraine. The rapid rise in crude oil and feedstock values was immediately reflected in base oil pricing in different parts of the world.

In the U.S., base oil producers announced a fresh round of posted price increases less than a month after a previous series of markups, making exports less attractive.

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In Europe, base oil prices surged as countries considered banning crude oil and natural gas imports from Russia, which would affect base oil production from plants that rely on Russian oil as feedstock. Suppliers there were also focusing on meeting domestic requirements and had few cargoes for export, particularly of the API Group I grades.

Asian suppliers were no exception as they adjusted offers up during the week since they, too, felt the squeeze on margins as oil prices soared. It was heard that a Singapore-based producer intended to increase its ex-tank prices as of the end of the week. The company’s API Group I grades will be lifted by $130 per metric ton, its Group II 150N by $130/t as well, and its Group II 500N by $80/t. The sole Taiwanese Group II producer was reported to have also raised its domestic list prices for March transactions. Similarly, Indian producers have adjusted up their postings for March business.

Spot prices in Asia have moved up faster than expected not only because of the increase in crude oil and feedstock prices, but also due to a sudden tightening of supply. This was partly the result of ongoing plant turnarounds, coupled with a pickup in demand as buyers tried to beat further price increases in coming weeks. A seasonal uptick was also noted in some markets such as China. At the same time, some suppliers have suspended offers as they awaited further developments in upstream markets.

In Northeast Asia, reports circulated that SK’s plant in Ulsan, South Korea, would be undergoing a partial shutdown from March to May which would affect Group III production. Also in South Korea, GS Caltex was heard to have slated a turnaround at its Group II and Group III plant in Yeosu, South Korea, for a three-week turnaround in April. South Korean producer Hyundai-Shell will also be shutting down its Group II plant in Daesan in April for close to a month of maintenance. In China, there were expectations that Handi Sunshine would be performing maintenance at its Group II refinery in Hainan for two months, starting this month. In Taiwan, Formosa Petrochemical had ramped up Group II production rates following a fire at the refinery in late January, but was heard to have dialed back output due to ongoing technical issues, although this could not be confirmed with the producer directly.

Meanwhile, in Southeast Asia, a Thai producer’s turnaround this month and an upswing in requirements have also tightened Group I availabilities, with bright stock in particular coming into focus and showing a price jump.

Higher prices in the U.S. and reduced export supply from Europe was expected to affect product availability in Asia too. While there is not an official embargo on base oil exports from Russia, most players were trying to avoid dealing with Russian exports amid financial sanctions. Additionally, some production issues at a Middle East plant were expected to put a crimp on Group III exports from that particular supplier.

In India, the conflict in Ukraine has sent consumers back into the market to secure additional volumes as there were expectations of a continued rise in base oil values, given soaring crude oil prices and tightening supplies. For example, exports from the U.S. were still expected to arrive in coming weeks, but fresh transactions have all but dried up given increased domestic demand at origin, strained availability of the lighter grades and higher export prices. Likewise, South Korean volumes were less available as producers were building stocks in preparation for their turnarounds and as a result, offered fewer spot cargoes.

Chinese buyers were actively seeking cargoes in the region, with particular emphasis on Group I supplies as the spring lubricant production season got underway. While availability in Southeast Asia was limited and prospects of importing from other regions such as Europe were turning dimmer, there was some business concluded from Southeast Asia to various Chinese ports during the week.

Despite all the stumbling blocks that market participants were dealing with – including transportation issues and soaring freight prices – several export shipments were discussed during the week. A 3,100-metric-ton lot of four base oil grades was heard from Malacca, Malaysia, to Weifang and Tianjin, China in early April. Around 9,400 metric tons were expected to move from Singapore to Taicang and Zhangjiagang, China in late March. About 3,000-4,000 metric tons were being discussed for shipment from Rayong, Thailand, to Nantong, China, in late March. A 2,000-metric-ton cargo was also on the table for lifting in Sri Racha, Thailand, to West Coast India and/or Hamriyah, United Arab Emirates, in late March.

As mentioned above, spot base oil prices in Asia have firmed, with a few of the grades showing steeper adjustments given increasingly limited availability. Ex-Singapore prices also underwent upward adjustments on a producer’s price hikes. The ranges portrayed below reflect bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices jumped from last week on firm fundamentals. The Group I solvent neutral 150 grade was higher by $40/t at $930/t-$960/t, and the SN500 was up by $50/t at $1,090/t-$1,130/t. Bright stock edged up by $30/t to $1,210/t-$1,250/t, all ex-tank Singapore.

Prices for the Group II 150 neutral moved up by $40/t to $940/t-$980/t, while the 500N edged up by $30/t to $1,120/t-$1,160/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was $40/t higher at $840/t-$880/t, and the SN500 was also up by $40/t at $950/t-$990/t. Bright stock increased by $50/t to $1,000/t-1,040/t, FOB Asia.

The Group II 150N was assessed higher by $50/t at $900/t-$940/t FOB Asia, but the 500N and 600N cuts edged up by $30/t to $920/t-$960/t, FOB Asia.

In the Group III segment, prices were stable to firm. The 4 centiStoke was assessed up by $10/t at $1,450-$1,490/t, and the 6 cSt was holding at $1,420/t-$1,460/t. The 8 cSt grade was up by $10/t at the low end of the range at $1,170-$1,200/t, FOB Asia, all for fully approved product.

Crude oil futures remained volatile, jumping one day and retreating the next as players weighed the impact of a potential increase in supply from OPEC+ producers to cover for the shortfall created by sanctions on Russian oil exports, following its invasion of Ukraine. Brent futures rose on Thursday after tumbling by 13% in the previous session, showing the steepest one-day drop in nearly two years.

“Uncertainty over where and when supply will come from to replace crude from the world’s second-largest exporter Russia in a tight market has led to wide-ranging forecasts for oil prices between $100 and $200 a barrel,” a Reuters article explained.

On March 10, Brent May futures were trading at $115.72 per barrel on the London-based ICE Futures Europe exchange, from $116.82/bbl on March 3.

Dubai front month crude oil (Platts) financial futures for April settled at $102.54/bbl on the CME on March 9, from $104.43/bbl on March 2 (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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