Asia Base Oil Price Report

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Base oil prices reacted to the reverberations felt in energy and financial markets as several countries imposed more sanctions on Russian exports in a consolidated effort to stop the country’s war against Ukraine. Crude oil prices surged as Russian oil and natural gas imports were banned from the United States and the U.K. imposed new economic sanctions. Even though countries in the European Union have not placed an embargo on Russian energy imports, the commercial and financial sanctions that have been put in place discouraged traders and importers from being involved in transactions with Russia.

Crude oil prices remained volatile, skyrocketing one day and falling the next as OPEC+ members discussed the possibility of bumping up oil production. COVID-19-related lockdowns in China also fueled concerns about a slump in oil demand from the second largest oil consumer in the world.

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As a result of the volatility in energy markets, base oil participants found it difficult to map out their action plans for the next several weeks. In the U.S., for example, a large producer announced a significant posted price increase of 70 cents per gallon for its base oils, only to backtrack a few days later and initiate a price decrease of 30-40 cents/gal as crude prices eased.

Both buyers and sellers in Asia were trying to assess possible price trends and product needs, leading some producers to hold back on offers until a clearer picture emerged. Additionally, given refinery economics and steeper fuel prices, some refiners have opted for steering more feedstocks into the fuels stream than into base oils, as margins for the latter have weakened.

The situation was further complicated by the possibility that the base oils market would tighten further as several plant turnarounds were on the horizon.

In Northeast Asia, SK’s plant in Ulsan, South Korea, was heard to have postponed a partial shutdown from March to April. The maintenance program would affect Group III production. Also in South Korea, GS Caltex was expected to undergo a turnaround at its Group II and Group III plant in Yeosu, South Korea, for three weeks 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. These turnarounds were not confirmed by the producers directly.

Despite the need to build inventories to cover requirements during the upcoming turnarounds, South Korean producers were heard to be working on several export transactions during the week. A 2,000-metric ton cargo was being discussed for shipment from Yeosu to Tanjung Priok, Indonesia, in mid-April. About 10,000 metric tons were on the table from Daesan to Zhuhai, China, Singapore and Bangkok, Thailand, for early April lifting. A 3,000-metric ton parcel was expected to cover Pyongtaek to Hamriyah, United Arab Emirates, at the end of March/beginning of April. A 3,400-metric ton cargo of two base oil grades was in discussion for Onsan to Bangkok and Map Ta Phut, Thailand, in mid-April. A 1,000-metric tons lot was likely to ship from Yeosu to Ho Chi Minh, Vietnam, in the second half of April. A 9,400-metric ton parcel was being discussed for shipment from Ulsan to India in late March/early April. Two thousand metric tons of two grades were mentioned for shipment from Yeosu to Manila, in the Philippines, the first week of April. A 2,700-metric ton cargo was expected to be lifted in Onsan for Wakayama, Japan, in late March.

In Southeast Asia, a Thai producer was expected to complete a turnaround this month, and the outage was heard to have resulted in reduced availability of Group I base oils. Exports from Singapore were heard to have picked up the pace. A 9,800-metric ton cargo made up of base oils and chemicals was expected to be lifted from Singapore to Taicang, China, and Yokohama, Japan, in late March. About 13,000 metric tons of xylenes and base oils were getting ready to be shipped from Singapore to several ports in China the first week of April. Another 8,200 metric tons of base oils and other chemicals were expected to be shipped from Singapore to Ennore, Chennai and Kolkata in India, and Chittagong, Bangladesh, in mid-April. A 1,900-metric ton parcel was likely to be lifted in Singapore for Yokohama in late March.

In Taiwan, Formosa Petrochemical had increased production rates at its Group II plant following a fire at the Mailiao refinery in late January, but was understood to have limited spot base oil exports due to ongoing technical issues. The producer raised domestic list prices earlier this month to reflect market conditions.

China typically imports large quantities of base oils from Taiwan, mostly under term contracts, but also as spot supplies. Demand for import spot cargoes had softened in China given increased domestic production, particularly of light viscosity grades, but the need for heavy-vis grades continued to be quite strong, leading importers to search for cargoes elsewhere as the spring production cycle gets underway.

In production, there were expectations that Handi Sunshine would be performing maintenance at its Group II refinery in Hainan for two months, starting this month.

Group I availability from Southeast Asia was reported to be thin, with many cargoes going to Southeast Asian buyers who did not have to deal with as many complications in terms of shipping as those completing transactions into more distant destinations. Chinese buyers were therefore finding it difficult to compete with local buyers as base oil prices have moved up and freight rates have also risen. Some heavy-vis cargoes have become available from Chinese producers for the domestic market and prices have moved up, but bright stock was still difficult to obtain.

In India, supply has become more limited amid an upsurge in demand, as many buyers tried to beat increases later on, and refiners have also favored fuel production given the steep price of diesel and other fuels. Imports were becoming less and less attractive price-wise given a weakening of the local currency, along with rising prices in other regions such as the U.S. It was heard that some Group I cargoes were being offered by a Pakistani refiner, while export supplies from the Middle East were said to be dwindling.

Due to the strained market conditions, spot base oil prices in Asia have firmed again this week, with those grades that were showing heightened tightness showing larger adjustments. 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 and a large producer’s increases implemented last week. The Group I solvent neutral 150 grade was up by $70/t at $1,000/t-$1,030/t, and the SN500 was up by $60/t at $1,150/t-$1,190/t. Bright stock edged up by $40/t to $1,250/t-$1,290/t, all ex-tank Singapore.

Prices for the Group II 150 neutral jumped by $100/t to $1,040/t-$1,080/t, while the 500N edged up by $30/t to $1,150/t-$1,210/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 climbed by $90/t to $930/t-$970/t, and the SN500 was up by $50/t at $1,000/t-$1,040/t. Bright stock increased by $50/t to $1,050/t-1,090/t, FOB Asia.

The Group II 150N was assessed higher by $50/t at $950/t-$990/t FOB Asia, and the 500N and 600N cuts edged up by $40/t to $960/t-$1,000/t, FOB Asia.

In the Group III segment, prices were also firming. The 4 centiStoke was assessed up by $20/t at $1,470-$1,510/t, and the 6 cSt edged up by $30/t to $1,450/t-$1,490/t. The 8 cSt grade was up by $10/t at $1,180-1,210/t, FOB Asia, all for fully approved product.

Crude oil futures rose by about 3% on Thursday after falling for three consecutive trading sessions as the International Energy Agency (IEA) predicted that oil markets might be short three million barrels a day of Russian crude and refined products, starting in April, given current sanctions. The supply loss would exceed a drop in demand of one million barrels per day expected to result from higher fuel prices. A decline in COVID cases in China boosted expectations of increased oil demand if the population was allowed to travel and workers would return to manufacturing operations.

On March 17, Brent May futures were trading at $101.54 per barrel on the London-based ICE Futures Europe exchange, from $115.72/bbl on March 10.

Dubai front month crude oil (Platts) financial futures for April settled at $92.69/bbl on the CME on March 16, from $102.54/bbl on March 9 (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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