On July 14, Brent September futures were trading at $98.32 per barrel on the London-based ICE Futures Europe exchange, from $104.65/bbl on July 7. A year ago, Brent was trading in the mid $70s/bbl.

Dubai front month crude oil (Platts) financial futures for August settled at $92.20/bbl on the CME on July 13, from $92.71/bbl on July 6.

With crude oil prices having come down from recent highs, consumers worried about purchasing too much base oil at current levels, and then finding themselves in possession of high-priced inventories if values were to soften. For the time being, base oil demand was steady as buyers continued to run lubricant plants at close to full rates, but it appeared that purchases were largely limited to volumes needed to run operations on a daily basis. The recently observed strained supply conditions have started to ease.

Some base oil consumers were also trying to use up existing inventories and receive new shipments under term contracts, rather than venture out into the spot market.

Refiners had also favored diesel production as prices had ballooned, but they have come down over the last few days, and light-viscosity base oil production was likely to see a boost as prices became more attractive against competing fuel prices.

In the key market China, new coronavirus-related restrictions and potential lockdowns were expected to impact economic activity and the movement of millions of people in at least six different cities as the government pursued its zero-COVID policies, including in Jiangsu Province, an important manufacturing region. According to a survey conducted by Bloomberg, economists expected a Chinese government report to reflect that gross domestic product grew about 1 percent in the second quarter of 2022 compared with a year earlier – a significant drop from the 4.8 percent expansion in the first quarter, and much lower than the government’s 5.5 percent growth goal for this year.

For the base oil and lubricants market in particular, this meant that demand has been more subdued than expected, and domestic plants may start to lower production rates if consumption does not absorb more of the products that are being manufactured. Interest in imports has been lackluster, with the exception of the heavy-viscosity grades, which are always scarce in the Chinese supply system. A 2,000 metric ton cargo was expected to be shipped from Rayong, Thailand, to Nantong, China, this month. About 8,500 metric tons were being discussed for shipment from Ruwais, Qatar, to Nantong in mid-August.

A few cargoes have moved to China from Southeast and Northeast Asia in recent days, but the quantities were lower than expected for this time of the year, according to reports. Taiwan typically exports significant amounts of API Group II grades to China, but volumes have declined over the last two months, with Taiwanese cargoes making their way to other countries in Asia and the Middle East. A 2,000 metric ton cargo was recently discussed for shipment from Mailiao to Manila, Philippines, for July dates, and a larger parcel was shipped to India this month as well. Some Southeast Asian cargoes, which until recently would have been expected to move to China, have found takers in the Middle East instead.

Group I supplies from Southeast Asia remained on the tight side; however, the restart of a plant in Thailand, following an unexpected shutdown due to production issues, was expected to help ease some of the tightening. A few fresh shipping inquiries emerged this week, with a 6,000 metric ton base oil cargo mentioned for shipment from Port Klang, Malaysia, to Gebze, Turkey, at the end of July.

Group II availability was expected to lengthen as demand has cooled down in Asia and more plants have resumed steady operations. In the Group III segment, supply and demand conditions were deemed mostly balanced.

In India, the monsoon season, which brings heavy flooding and ensuing logistical issues, was impacting activity in the industrial and automotive segments. The weakening of the Indian rupee against the dollar was also dampening business. India’s appetite for base oil imports has declined over the last few weeks, with import volumes falling in June compared to May levels, and July expected to also see more muted business. Several base oil cargoes moved to India from the United Arab Emirates, Singapore, South Korea, along with a couple of small cargoes from the United States during the June-July period. A South Korean supplier was heard to have inquired about freight rates to move a 5,000 metric ton cargo to West Coast India or alternatively, the U.S. Gulf in late July to early August. About 16,000 metric tons were being considered for lifting in Ras Laffan, Qatar, for delivery in Mumbai in the second half of July. Steep freight rates and limited vessel space may hamper some export transactions.

Domestic supplies were deemed sufficient to cover many requirements in India, but a local producer’s Group II base oil plant was undergoing a turnaround, which had led several consumers to look for alternative sources of product.

Spot base oil prices in Asia were largely stable this week, as many participants remained in a wait-and-see position to assess developments and price trends. 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 unchanged, with the exception of the Group II 150 neutral assessment, which was adjusted up. Spot prices for the Group I solvent neutral 150 grade were heard at $1,170/t-$1,200/t, and the SN500 at $1,360/t-$1,400/t. Bright stock was hovering at $1,470/t-$1,510/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were slightly up by $10/t at $1,320/t-$1,360/t, while the 500N was unchanged at $1,380/t-$1,420/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $1,090/t-$1,130/t, and the SN500 was unchanged at $1,250/t-$1,290/t. Bright stock was holding at $1,330/t-1,380/t, FOB Asia.

The Group II 150N was holding at $1,270/t-$1,310/t FOB Asia, and the 500N and 600N cuts assessed unchanged at $1,320/t-$1,370/t, FOB Asia.

In the Group III segment, prices were also stable. The 4 centiStoke was assessed at $1,650-$1,690/t, and the 6 cSt at $1,630/t-$1,670/t. The 8 cSt grade was holding at $1,360-1,400/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.