Crude oil prices remained very volatile, spiking one day and plummeting the next, and diesel and gasoline prices have climbed in all regions. If the Russian war on Ukraine rages on, there were expectations that the situation in crude oil markets would not improve significantly. On its website, the International Monetary Fund stated that “beyond the suffering and humanitarian crisis from Russia’s invasion of Ukraine, the entire global economy will feel the effects of slower growth and faster inflation. Prices for energy, grains and metals soared since the start of the conflict, signaling that inflation rates are poised to accelerate.” On Tuesday, the IMF slashed its forecast for global economic growth by nearly a full percentage point, sending crude futures on a downward spiral.

Base oil demand has slowed down somewhat in Asia due to the uncertainties plaguing the markets, as climbing production costs translated into higher prices for downstream consumers, and this was placing a damper on business.

Given remnants of transportation difficulties caused by the COVID-related lockdowns in China and accompanying restrictions on vessel movements and discharge schedules, some vessels remained tied up at port and were not available for onward voyages. The ongoing lockdowns, together with supply chain disruptions caused some time ago by temporary manufacturing outages at Chinese plants and in other parts of the world meant that there was still a shortage of certain products, components and containers. Empty containers were sitting at several ports and were unable to be loaded again due to these shortages. Aside from the logistical disruptions, these conditions, together with climbing bunker fuel prices were driving freight rates up. The lack of shipping containers was also limiting flexibag base oil transactions, sources said.

In China, the massive coronavirus-related lockdowns in Shanghai and surroundings were heard to be causing a drop in fuel and lubricants consumption, but this was expected to be temporary as lockdowns were starting to be partially lifted. Importers and consumers were anticipated to return to the market to replenish inventories as many have been working off existing stocks due to price uncertainties. Some areas may see a tightening of supplies due to plant turnarounds. Handi Sunshine was heard to have scheduled maintenance at its API Group II refinery in Hainan for two months, starting in late March. A second Chinese producer was expected to shut down its Group I plant this month until May. Several refiners have cut back production rates given the need to use feedstocks for fuel production.

Group I supplies were tight across the region, with Southeast Asia producers seeing a recent uptick in buying interest against a decline in availability. Given the worldwide rationalization of Group I production in recent years, there are times when the market sees increased tightening of supplies and climbing prices in all regions, as was the case at the time of writing. One of the countries that has several Group I plants is Japan, but production is gradually being phased out, with the Eneos plant in Negishi slated to be shut down permanently in September this year, and a second Eneos plant in Wakayama expected to be idled in late 2023.

Group II availability was also described as strained due to steady demand and reduced output as some regional facilities were undergoing turnarounds and a few refiners have cut back base oil output to stream more feedstocks into fuels production due to refinery economics. Export supplies from major sources of Group II base stocks like the U.S. have dwindled due to strong domestic demand, coupled with the similar operating decisions favoring production of certain refined products over base oils. Additionally, the ban on Russian vacuum gas oil imports was also expected to impact base oil production rates. India often imports large quantities of U.S. Group II grades whenever they are available and prices are workable, but shipments into the country have dropped.

Indian buyers were heard to be heavily relying on domestic base oil production as volumes were ample and prices were considered competitive, but some imports were also expected to arrive from within Asia. A 2,000 metric ton cargo was discussed from Mailiao, Taiwan, to Mumbai for end of May shipment. Close to 3,000 metric tons were being considered for shipment from Ulsan, South Korea, to Taichung, Taiwan, and Mumbai and Jebel Ali, Dubai, in the United Arab Emirates, in early May.

Group II and Group III availability from South Korea has been curtailed due to recent and ongoing plant turnarounds. According to reports, SK’s plant in Ulsan, South Korea, would be partially shut down in April-May, affecting Group III production. Also in South Korea, GS Caltex’s Group II and Group III plant in Yeosu was expected to be run at reduced rates in April due to maintenance in upstream units. South Korean producer Hyundai-Shell was expected to idle its Group II plant in Daesan in mid-April for slightly over a month of maintenance. There was no direct confirmation from the producers about these turnarounds. Several South Korean cargoes were being discussed for shipment to various destinations around Asia during the week. A 2,000 metric ton cargo made up of two grades was on the table to be lifted in Yeosu for Manila, Philippines, in mid-May. A 4,000 metric ton parcel of several grades was expected to be shipped from Pyeongtaek to West Coast India and Jebel Ali in the second half of May. A 1,000 metric ton lot was discussed from Ulsan to Port Klang, Malaysia, for prompt shipment. Additionally, an 8,600 metric ton cargo was being discussed for shipment from Dumai, Indonesia, to Nantong, China, and Ulsan, South Korea.

Spot base oil prices in Asia were stable to firm this week, with tight supply and firm feedstock prices offering support to current price indications. 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 were stable to firm week on week. The Group I solvent neutral 150 grade was higher by $10/t at $1,060/t-$1,090/t, and the SN500 was holding at $1,210/t-$1,250/t. Bright stock was assessed at $1,380/t-$1,420/t, all ex-tank Singapore.

Prices for the Group II 150 neutral moved up by $10/t to $1,210/t-$1,250/t, and the 500N edged up by $10/t as well to $1,270/t-$1,330/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was adjusted up by $10/t to $1,000/t-$1,040/t, and the SN500 was also up by $10/t at $1,110/t-$1,150/t. Bright stock increased by $10/t to $1,190/t-1,250/t, FOB Asia.

The Group II 150N was higher by $10/t at $1,010/t-$1,050/t FOB Asia, and the 500N and 600N cuts were higher by $20/t at $1,080/t-$1,140/t, FOB Asia.

In the Group III segment, prices were steady. The 4 centiStoke was assessed at $1,480-$1,520/t, and the 6 cSt at $1,460/t-$1,500/t. The 8 cSt grade was holding at $1,190-1,220/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures crept up on Thursday on growing concerns about supply as the European Union was still considering a potential ban on Russian oil imports, while supplies from Libya have also declined. Libya, a member of OPEC, on Wednesday said the country was losing more than 550,000 barrels per day of oil output due to blockades at major fields and export terminals, according to Reuters.

On April 21, Brent June futures were trading at $107.97 per barrel on the London-based ICE Futures Europe exchange, from $108.04 on April 14.

Dubai front month crude oil (Platts) financial futures for May settled at $102.55/bbl on the CME on April 20, from $104.23/bbl on April 13. (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.