Asia Base Oil Price Report

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Base oil prices in Asia tumbled this week on more moderate crude oil and feedstock prices compared to a month ago, along with mounting supplies and weaker demand. The need to compete on the international trading stage also pushed producers to reduce offers, but lofty freight rates and logistical issues dampened some of the proposed transactions. The summer holidays in some countries affected buying interest as well.

Supply levels in Asia have grown as most plants were running well and refiners were not pressed to favor distillates output over base oil production as the price of fuels has retreated. This was good news for consumers, as gasoline and diesel prices had jumped due to sky-high crude oil prices and prospects of limited oil supply as international bans on Russian exports were implemented.

However, the decision by OPEC+ during the group’s recent meeting to increase oil production by 100,000 barrels per day, together with the possibility that Iran would agree to a nuclear deal and therefore be allowed to export oil offered the hope that global crude supplies would become more plentiful.

Crude oil futures rebounded from lower levels registered early on Wednesday, boosted by encouraging signs of increased U.S. gasoline demand and lower-than-expected U.S. inflation figures. Prices had fallen earlier as the flow of crude on the Russia-to-Europe Druzhba pipeline resumed after a temporary halt, Reuters reported.

On Aug. 11, Brent October futures were trading at $98.49 per barrel on the London-based ICE Futures Europe exchange, from $96.27/bbl on Aug. 4.

Dubai front month crude oil (Platts) financial futures for September settled at $93.49 per barrel on the CME on Aug. 10, compared to $92.14 on Aug. 3.

Softer spot base oil demand and lengthening supply was observed in most regions. The situation in Asia was the result of a combination of factors, among them a slowdown in base oil consumption in key markets such as China and India, concerns about a potential global recession, fewer plant turnarounds in the second half of the year, and efforts by consumers to use up existing inventories and secure product through term contracts.

At the same time, potential supply disruptions caused by severe weather in Asia and other regions such as the United States Gulf Coast meant that both suppliers and buyers needed to keep extra barrels to cover for any shortages that may ensue. The hurricane season in the U.S. typically sees a majority of storms in August and September and this year, forecasts called for several tropical weather systems, which could cause supply shortages and result in demand for Asian base oil barrels.

Demand from several countries in the Americas remained fairly healthy and Asian suppliers contemplated shipping product to those destinations in order to balance supplies at home. However, high freight rates, port congestion and a lack of vessel space on certain routes was curbing the conclusion of deals. API Group I bright stock in particular appeared to be affected by the logistical issues, with Thai supplies heard to be readily available, but difficulties with shipments hampering the conclusion of transactions, and prices falling as a result.

Ongoing COVID-19-related lockdowns in China and an economic slowdown resulted in lackluster demand for base oil imports. Geopolitical tensions between China and Taiwan also added to the uncertainties. A majority of Chinese base stock requirements were fulfilled with domestic products, and importers’ price ideas were lower than in the previous weeks, discouraging exporters to pursue business into China, although at least a couple of cargoes were mentioned as moving from South Korea to China this month.

In India, base oil demand has weakened as expected during the monsoon season, but it has declined less than suppliers had anticipated. Buyers resisted offer levels and took a wait-and-see position as base oil prices were falling globally, while some suppliers acquiesced to lower prices in order to conclude business. With the restart of a domestic producer’s plant following a turnaround, local availability of base oils has improved. Consumers were relying heavily on domestic supplies, despite producers’ price increases.

There were a couple of surplus cargoes discussed for shipment from India to the Americas, the U.S. Gulf and Southeast Asia where values were higher. A 2,000-metric ton lot was quoted for shipment from Mumbai to Bangkok, Thailand, for August or September dates. South Korean and Taiwanese base oil cargoes were expected to be moved to India this month as usual, but price ideas have fallen in line with the growing supply levels.

Northeast Asian suppliers also explored opportunities to ship base oils to Southeast Asia, as well as ports in the Americas and the Middle East. A 3,000-metric ton parcel was discussed for shipment from Mailiao, Taiwan, to Rio de Janeiro, Brazil, at the end of August. About 1,000 metric tons were expected to be shipped from Yeosu, South Korea, to Al Jubail, Saudi Arabia, in the second half of August. A 4,000-metric ton lot was also quoted for Yeosu to Hamriyah, United Arab Emirates, for Aug. dates. Approximately 7,000 metric tons were on the table for shipment from Yeosu to Vietnam in August or September and there was a smaller cargo mentioned for shipment to Malaysia as well. A 1,500-metric ton cargo was on the table from Mailiao to Gebze, Turkey, in the first half of September.

Spot base oil prices in Asia underwent significant downward adjustments this week on mounting supply levels, tempered demand and lower feedstock prices. The ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices saw hefty downward adjustments compared to the previous week. Spot prices for the Group I solvent neutral 150 grade were down by $50/t at $1,120/t-$1,150/t, and the SN500 was also lower by $50/t at $1,290/t-$1,330/t. Bright stock was assessed down by $50/t at $1,360/t-$1,400/t, all ex-tank Singapore.

Prices for the Group II 150 neutral plummeted by $80/t to $1,240/t-$1,280/t, while the 500N also dropped by $80/t to $1,290/t-$1,330/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was down by $80/t at $970/t-$1,010/t, and the SN500 dropped by $100/t to $1,100/t-$1,140/t. Bright stock prices fell by $100/t as well to $1,120/t-1,170/t, FOB Asia.

The Group II 150N slipped by $100/t at $1,080/t-$1,120/t FOB Asia, and the 500N and 600N cuts were also down by $100/t to $1,130/t-$1,180/t, FOB Asia.

In the Group III segment, prices experienced more moderate decreases. The 4 centiStoke was down by $40/t at $1,610-$1,650/t, and the 6 cSt was also down by $40/t at $1,590/t-$1,630/t. The 8 cSt grade moved down by $40/t as well to $1,320-1,360/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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