Whether spot prices have bottomed out in Asia was the million-dollar question everyone was asking this week, as the downward spiral observed over the last several weeks appeared to have petered out. At the very least, prices have stabilized, and this was partly attributed to reduced output rates at some refineries, coupled with renewed buying interest from consumers who had held off on purchases and were now in need to replenish stocks.
Demand from key markets such as China and India was still lackluster, but there were intimations that buyers have realized that prices were not likely to move down further, and in fact, there was a chance that they would start to edge up. This sentiment drove some buyers back into the market after several weeks’ absence.
While Indian consumers were mostly trying to meet base oil requirements through the purchase of domestic product under term agreements, they have also made inquiries to secure imports, particularly as there were indications that prices were near the bottom. There were several cargoes expected to arrive in coming weeks from South Korea, Taiwan, Singapore and the Middle East, and a few more were being discussed for September loading. Approximately 8,000 metric tons of base oils were mentioned for shipment from Singapore to Chittagong, Bangladesh, and Ennore, Kakinada and Kolkata, India, in the first half of October. A 6,000-metric ton lot was on the table for shipment from Ruwais, United Arab Emirates, to West Coast India at the end of September. Another 6,000 metric tons were likely to be shipped from Ruwais to Hazira, India. Slightly over 19,000 metric tons also moved from Yanbu and Jeddah, Saudi Arabia, to West Coast India in late August. About 10,000 metric tons were also mentioned for lifting in Ras Laffan, Qatar, to West Coast India in early September.
Imports from the United States, which had been ubiquitous in India at this time of the year in the past were not considered competitive, since prices have not fallen as fast as expected and there was not a significant oversupply situation at origin. However, the U.S. market has started to lengthen, and some opportunities may present themselves in the last quarter of the year.
It seems a few cargoes have been concluded from Asia to the Americas instead in recent weeks, with a 2,000-metric ton base oil parcel being discussed for shipment from Rayong, Thailand, to Houston, in the U.S., in mid-October, and other cargoes having been finalized from South Korea to Latin America.
In China, activity has remained rather muted due to abundant domestic supply against lukewarm demand given extreme weather conditions, ongoing COVID-19 lockdowns and economic uncertainties. The lockdowns resulted in supply chain disruptions, along with logistics and transportation issues. The difficulties in pinning down loading and discharge dates at certain ports were discouraging some participants from entertaining product purchases from abroad. Instead, most buyers relied on domestic supplies, although certain grades like the API Group I bright stock have become quite tight.
Chinese buyers would have the option of securing Group I cargoes in Southeast Asia, but competition with other buyers in the region was challenging, especially since some players appeared willing to accept the higher prices proposed by sellers. Steep freight rates added to the difficulties. There were a couple of cargoes expected to move from Northeast Asia to Southeast Asia, with about 2,000 metric tons mentioned for shipment from Onsan, South Korea, to Merak and Tanjung Priok, Indonesia, in early October. A 6,000-metric ton cargo was being discussed to cover Onsan to Merak, Jakarta and Ciwandan, Indonesia, the first week of Oct. A 2,000-4,000 metric ton lot was on the table for shipment from Daesan, South Korea, to Singapore in the first half of September. About 3,000 metric tons were expected to be shipped from Yeosu to Manila, the Philippines, in early October.
South Korean and Taiwanese suppliers typically move large quantities of base oils to China, but volumes have declined, particularly those shipped by the sole Taiwanese Group II producer. Instead, the Northeast Asian suppliers have finalized several transactions to the Middle East and Latin America, with a 4,000-metric ton cargo made up of four grades quoted from shipment from Yeosu, South Korea, to Hamriyah, United Arab Emirates, in September. A second cargo was being discussed for lifting in Ulsan to Hamriyah at the end of September to early October.
Within the Group III segment, there was a slight imbalance between supply and demand for the 6 centiStoke and 8 cSt grades, while the 4 cSt cut was quite tight. Some suppliers resorted to selling 4 cSt barrels in combination with some volumes of the 6 cSt and 8 cSt grades to encourage consumption of the latter. A Middle East facility that supplies to Asia was undergoing a turnaround that was expected to be completed this month, allowing for more product to come into the market.
Spot base oil prices were generally stable this week, although a number of producers have made overtures towards achieving higher numbers, while a couple of ranges were adjusted down slightly. 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 were unchanged week on week. Spot prices for the Group I solvent neutral 150 grade were heard at $1,000/t-$1,030/t, and the SN500 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 were also steady from last week at $1,120/t-$1,160/t, while the 500N was assessed at $1,170/t-$1,210/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was holding at $850/t-$890/t, and the SN500 at $990/t-$1,030/t. Bright stock prices were adjusted down to bring them more in line with current market indications, with the range being revised down by $20/t to $990/t-1,040/t, FOB Asia.
The Group II 150N inched up by $10/t to $950/t-$990/t FOB Asia, and the 500N and 600N cuts were higher by $20/t at $1,020/t-$1,070/t, FOB Asia range.
In the Group III segment, prices were steady from last week. The 4 centiStoke was assessed at $1,510-$1,550/t, and the 6 cSt at $1,490/t-$1,530/t. The 8 cSt grade was hovering at $1,210-1,250/t, FOB Asia, for fully approved product.
Upstream, crude futures slipped in early trading on Thursday, extending significant losses from the previous session on concerns that renewed lockdowns in China and lower crude consumption in that country would have worldwide reverberations and lead to a global economic slowdown and reduced fuel demand.
On Sept. 8, Brent November futures were trading at $88.55 per barrel on the London-based ICE Futures Europe exchange, from $94.45/bbl on Sept. 1.
Dubai front month crude oil (Platts) financial futures for October settled at $90.02 per barrel on the CME on Sept. 7, compared to $91.32 on Aug. 31.
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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