Growing supply levels and slowing demand continued to exert pressure on spot prices in Asia, and although numbers were lower than last week, the drops were more moderate. Producers focused on finding a home for their surplus material, not only within the region, but in faraway destinations such as Latin America. However, logistical difficulties and freight rates hampered some of these transactions.
While crude oil and feedstock prices have also softened compared to highs seen in March and as recently as July, but they rose during the week as there was talk about OPEC+ producers trimming output in order to support prices.
On Aug. 25, Brent October futures were trading at $101.33 per barrel on the London-based ICE Futures Europe exchange, from $95.13/bbl on Aug. 18.
Dubai front month crude oil (Platts) financial futures for September settled at $98.39 per barrel on the CME on Aug. 24, compared to $90.15 on Aug. 17.
Despite earlier talk about refiners possibly adjusting operating rates to avoid a product build-up, there were no reports of lower production rates this month as margins were still deemed healthy. Some refiners were running at full rates in order to meet strong demand for transportation fuels and jet kerosene as well, as travel has increased with the easing of COVID-19 restrictions.
Meanwhile, trading in Southeast Asia was fairly steady, despite a slump in base oil demand since last month. Several cargoes were heard to have been shipped from Singapore to nearby countries such as Vietnam and Indonesia, but also to India. API Group I cargoes, particularly of bright stock, have been sold ex-Thailand in the region as well, but prices have fallen from their peaks earlier in the year. There has also been talk of Thai material possibly moving to the Americas. A 2,000-metric ton parcel was quoted for prompt shipment from Sriracha, Thailand, to Balboa, Panama, or Brownsville, United States. Approximately 6,000 metric tons of base oils and other chemicals were expected to be shipped from Singapore to Nhabe, Godau and Dong Nai, Vietnam, in early September. Near 6,000 metric tons were being discussed for shipment from Singapore to Bangkok and Koh Sichang, Thailand, in early Sep. A 1,500-metric ton lot was quoted for lifting in Sriracha and Rayong, Thailand, for Haiphong, Vietnam, in late August.
Movements to China have subsided as requirements were largely being met by domestic output, while an economic slowdown brought about by ongoing COVID-19 lockdowns and restrictions was also dampening buying interest. Some suppliers still held on to hopes that buying appetite would strengthen ahead of the National Day and Golden Week holidays in October, but at this point, it was unclear whether this would materialize, and a few producers have opted for reducing operating rates to lower their product overhang.
South Korean producers and the sole Taiwanese base oil producer were keeping an eye on developments in China, as the country is typically a large importer of base oils, particularly heavy grades. However, given lackluster buying interest in China, these suppliers have had to move most barrels to other locations over the last few months. A 6,500-metric ton base oil cargo was expected to be shipped from Onsan to Huizhou, China, and Merak and Jakarta, Indonesia, in mid-September. A smaller 1,400-metric ton lot made up of two base oil grades was mentioned for shipment from Onsan to Tianjin, China. A 2,500-metric ton cargo made up of five grades was expected to be shipped from Onsan to Singapore in early October. About 3,000 metric tons were expected to move from Ulsan to Callao, Peru, in the second half of September or the first half of October. There was talk about a large cargo being discussed for shipment from Ulsan to Houston, U.S., at the end of August.
In terms of Taiwanese shipments, 5,000 metric tons were being discussed for shipment from Mailiao to West Coast India or Hamriyah, United Arab Emirates, in mid-September. A 3,000-4,000 metric ton lot was also mentioned for lifting in Kaohsiung, Taiwan, to Hamriyah next month.
In India, demand has held at firmer levels than expected during the monsoon season and many buyers continued to meet requirements through term contracts and by securing domestic supplies. Given the downward trend of base oil pricing on a global scale, Indian buyers also pressured suppliers to lower their offers. Importers have been on the lookout for both light viscosity and heavy-vis cargoes in the region, with a number of parcels expected to be shipped from South Korea, Taiwan and Singapore. At the same time, some cargoes were being moved out of India to faraway ports in other regions. There was a shipping inquiry to move a large cargo from Hazira and Mumbai, India, to Rio de Janeiro, Brazil in September. About 2,600 metric tons were on the table for possible shipment from West Coast India to Cartagena, Colombia, in September as well.
Most spot base oil prices in Asia edged down again this week on rising supply levels and slower demand, but the adjustments were smaller than the previous week. 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 experienced more moderate adjustments than last week. Spot prices for the Group I solvent neutral 150 grade fell by $20/t to $1,000/t-$1,030/t, but the SN500 remained unchanged at $1,190/t-$1,230/t. Bright stock was holding at $1,260/t-$1,300/t, all ex-tank Singapore.
Prices for the Group II 150 neutral fell by $60/t to $1,120/t-$1,160/t, while the 500N dropped by $20/t to $1,170/t-$1,210/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 inched down by $20/t to $850/t-$890/t, and the SN500 dropped by $20/t as well to $1,030/t-$1,070/t. Bright stock prices fell by $40/t to $1,030/t-1,080/t, FOB Asia.
The Group II 150N fell by $40/t to $940/t-$980/t FOB Asia, and the 500N and 600N cuts were down by $30/t at $1,000/t-$1,050/t, FOB Asia.
In the Group III segment, prices had been holding at steadier levels than Group I and Group II grades, but experienced a heftier adjustment this week. The 4 centiStoke was down by $50/t at $1,520-$1,560/t, and the 6 cSt was also down by $50/t at $1,500/t-$1,540/t. The 8 cSt grade moved down by $50/t as well to $1,230-1,270/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.
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