In the meantime, given the bans and ensuing drop in Russian crude oil pricing, Turkey, India and China were expected to continue taking advantage of the lower prices. China is the top buyer of Russian crude, while India has purchased three times as much oil from Russia since the beginning of the conflict as in the same period last year, according to a report from Refinitiv Eikon, a provider of market data and infrastructure.

The relaxation of COVID-19-related lockdowns and restrictions in the Shanghai area of China also pushed prices up as there were expectations of an increase in Chinese crude consumption. At the same time, base oil market participants hoped to see revitalized activity in downstream lubricant segments as large parts of the population would be able to return to their workplace and use public transportation, prompting an increase in fuel and lubricants consumption.

While strong signs of increased base oil demand were yet to emerge in China, importers were getting ready to locate product and were keeping an eye on offers from Southeast Asian producers. At the same time, there appeared to be an oversupply of certain grades in China, and a producer was heard to have concluded some export shipments to Singapore and India. A 4,000- to 5,000-metric ton cargo was mentioned as possibly moving from Maoming to Mumbai, India, in the first half of June. A second cargo was heard for shipment from Jiangyin or Changzhou to India in the first half of June. Prices for this material were expected to be competitive.

The light grades are typically more abundant in China, while there is a structural deficit of the heavy grades such as bright stock, which is the kind of base oils that importers are usually after. Domestic producers’ supplies were heard to be tight, and some have increased their offer levels. However, a gap between buyers’ and sellers’ price expectations may hamper the conclusion of business.

Base oil availability has improved in South Korea after the return to full production of a number of plants, following turnarounds and reduced run rates in some cases. However, one producer’s facilities were still undergoing a turnaround. South Korean suppliers have been on the lookout for fresh export opportunities and have attracted interest from buyers in far-away destinations such as Latin America, the United States and Europe. Prices in India – a typical destination for South Korean shipments – were considered less attractive. This week, it was heard that 6,600 metric tons were being considered for shipment from Ulsan to La Plata, Argentina, in the second half of June. A base oil parcel was also discussed for shipment from Ulsan to New Orleans, U.S., in early June. Another 4,000 metric tons were on the table for shipment from Yeosu to Baton Rouge, U.S., in late June to early July. A small base oil parcel was also mentioned for shipment from Ulsan to Jebel Ali, Dubai, United Arab Emirates, in June. About 7,000 metric tons were discussed for shipment from South Korea to Europe this month as well.

There were expectations that the sole Taiwanese producer of Group II base oils would be able to offer more spot cargoes moving forward, as its run rates have improved, following some production hiccups earlier in the year. The producer was active on the export front, with 8,000-10,000 metric tons understood to be on the table for shipment from Mailiao, Taiwan, to La Plata, Argentina between the second half of June and the first half of July.

In India, buyers have been trying to cover product needs through contract volumes and have been hesitant to acquire more product than needed to run day-to-day operations, as there were concerns of accumulating too much material at current price levels. If prices were to start reversing course, then buyer would be caught with high-priced base stocks, and it was difficult to recoup raw material costs as increases were not easily accepted in downstream segments. Economic activity was understood to be affected by surging inflation and steep gasoline and diesel prices, and this was dampening consumption of refined products as well as lubricants.

Indian buyers have shown guarded interest in Southeast Asian Group I offers but were heard to have been reluctant to acquiesce to the suppliers’ price expectations. Nevertheless, it was heard that a cargo involving 5,000 metric tons of base oils was shipped from Rayong, Thailand, to Mumbai in late May, and other similar cargoes were considered.

Spot base oil prices in Asia were assessed higher this week, with high feedstock prices and tightening supply placing upward pressure on price ideas. 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 firmer week on week on steep feedstock prices and snug supplies, with spot prices for the Group I solvent neutral 150 grade assessed higher by $20/t at $1,170/t-$1,200/t, and the SN500 was up by $10-20/t at $1,360/t-$1,400/t. Bright stock also moved up by $20/t at $1,470/t-$1,510/t, all ex-tank Singapore.

Prices for the Group II 150 neutral moved up by $20/t to $1,300/t-$1,340/t, while the 500N was steeper by $10/t at $1,380/t-$1,420/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was up by $10/t at $1,070/t-$1,110/t, but the SN500 moved up by $20/t to $1,200/t-$1,240/t. Bright stock was also higher by $20/t at $1,290/t-1,350/t, FOB Asia.

The Group II 150N moved up by $30/t to $1,250/t-$1,290/t FOB Asia, and the 500N and 600N cuts were higher by $20/t at $1,290/t-$1,340/t, FOB Asia given that these grades were tighter in the region.

In the Group III segment, prices have advanced as well. The 4 centiStoke was assessed up by $10/t at $1,600-$1,640/t, and the 6 cSt was also up by $10/t at $1,590/t-$1,630/t. The 8 cSt grade edged up by $10/t to $1,320-1,350/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures slipped on Thursday after registering strong gains earlier in the week on reports that OPEC might start to produce more crude to offset a drop in Russian production caused by Western sanctions, CNN Business.com reported.

On June 2, Brent August futures were trading at $113.48 per barrel on the London-based ICE Futures Europe exchange, from $114.69/bbl for July futures on May 26. About a year ago, Brent was trading in the high $60s/bbl.

Dubai front month crude oil (Platts) financial futures for July settled at $107.70/bbl on the CME on June 1, from $106.92/bbl for June futures on May 25. (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.