Asia Base Oil Price Report

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Base oil prices in Asia were stable to slightly higher on the back of soaring crude oil and feedstock values and balanced supply and demand levels. While product orders were softer in some countries, there was heightened buying interest in others, as well as in Europe and the Americas, which attracted several Asian export shipments.

Crude oil prices remained historically high and exerted pressure on base oil prices. A tightening of feedstocks on the back of bans on Russian exports of crude oil and refined products was also causing base oil values to climb. Some countries such as India and China continued to import Russian crude oil, and have actually increased volumes, but several nations have been avoiding the purchase of Russian crude due to its ongoing war on Ukraine. This has caused global crude supply options to tighten, sending prices to new highs.

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However, oil prices reversed course and fell to two-week lows on Thursday on inflation concerns as there were interest rate hikes in the United States, Britain and Switzerland, but a tight global supply/demand scenario limited losses, according to Reuters.

On June 16, Brent August futures were trading at $116.43 per barrel on the London-based ICE Futures Europe exchange, from $122.83/bbl on June 9. A year ago, Brent was trading at around $70/bbl.

Dubai front month crude oil (Platts) financial futures for July settled at $109.99/bbl on the CME on June 15, from $114.92/bbl on June 8.

Steeper fuel prices were also pressuring refiners to decide whether to stream feedstocks towards the production of fuels or use them for base oil output. This seemed to have affected API Group I availability in particular, with Group I grades deemed tight not only in Asia, but in Europe and North America as well. Group II producers were not immune to the pressure of producing more gasoil, as prices were soaring. Base oil suppliers have raised prices in order to improve margins and justify production.

At the same time, base oil buyers were keeping a watchful eye on crude oil prices and some have decided to secure more cargoes now to avoid higher prices later on. But the camps were divided, as some consumers were also hesitant to buy too much product as signals from downstream markets were mixed, and there was also the chance that prices would start to soften as the spring production season winds down. Economic uncertainties and inflation also weighed on market sentiment.

Demand from China has also been disappointing despite the start of the busy production season because of recent massive lockdowns and fresh restrictions related to new COVID-19 outbreaks in major cities. Domestic producers were heard to be exporting cargoes to India and the Middle East to keep inventories in check.

Base oil supply in Asia was generally deemed balanced to tight, depending on the grade. As mentioned above, Group I showed some tightness as demand for certain grades such as bright stock remained solid, while the number of Group I producers has declined in recent years. In fact, a Japanese Group I plant was scheduled to be decommissioned in September or October this year, and a second one next year.

While many consumers were able to use substitutes from the Group II category in the case of a shortage of Group I grades, availability of Group II cuts was fairly tight and prices have edged up as well. Some suppliers who had extra availability of Group II grades chose to export them because of better returns.

Several producers have returned to full production rates, following reduced run rates or turnarounds, and have therefore found themselves in possession of extra availability. Many of them have been able to take advantage of arbitrage opportunities and have offered spot cargoes into regions where there is a shortage of certain grades and prices have reached all-time highs.

Exports have allowed Asian suppliers to avoid a product overhang and fill supply gaps elsewhere. There have been a number of cargoes concluded to the United States and Latin America, with about 17,000 metric tons expected to be shipped from Ulsan, South Korea, to Houston, Texas, in the first half of July. Several cargoes have also been concluded into India, with at least 10,000 metric tons heard to have been scheduled to be shipped from Taiwan to India this month. A Taiwanese cargo was also heard to have been booked to Argentina for end June/early July lifting.

Indian demand has been steady, but not particularly robust because buyers were more conservative in terms of how much product to acquire ahead of the monsoon season, which causes logistical and production issues. Despite a dearth in imports from the U.S., there appeared to be enough influx from Northeast Asia and the Middle East, coupled with local production, to cover the current call for product in India. Consumers felt confident there was enough supply to meet their needs and resisted some of the higher price offers that were forthcoming from various producers. A domestic refiner was heard to have started a 45-day turnaround, which might tighten local availability of Group II grades.

Spot base oil prices in Asia were assessed stable to firm this week, with fundamentals still exerting upward pressure on buying and selling ideas, but the price hikes were more moderate than in recent weeks. 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 generally stable, with spot prices for the Group I solvent neutral 150 grade assessed at $1,170/t-$1,200/t, and the SN500 at $1,360/t-$1,400/t. Bright stock was holding at $1,470/t-$1,510/t, all ex-tank Singapore.

Prices for the Group II 150 neutral inched up by $10/t to $1,310/t-$1,350/t, while the 500N was mentioned at $1,380/t-$1,420/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 moved up by $10/t to $1,080/t-$1,120/t, and the SN500 was also up by $10/t at $1,230/t-$1,270/t. Bright stock was higher by $10/t as well at $1,330/t-1,380/t, FOB Asia.

The Group II 150N was holding at $1,270/t-$1,310/t FOB Asia, but the 500N and 600N cuts were higher by $10/t at $1,320/t-$1,370/t, FOB Asia.

In the Group III segment, prices edged up too. The 4 centiStoke was assessed up by $20/t at $1,630-$1,670/t, and the 6 cSt was also up by $20/t at $1,620/t-$1,660/t. Similarly, the 8 cSt grade increased by $20/t to $1,350-1,380/t, FOB Asia, all for fully approved product.

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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