Asia Base Oil Price Report

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The tide seems to have turned, at least temporarily, in Asian base oil markets, with spot prices stabilizing or moving up slightly, reversing the sharp downward trend that started in late July. This phenomenon was partly attributed to a bout of buying ahead of holidays in a few countries, and the need to replenish stocks as buyers had held off on purchases given weakening prices. Several refiners have also opted for lowering production rates in order to avoid a product buildup during the last quarter of the year, and this has helped tighten the supply and demand ratio.

Whether the upward trend would persist in coming weeks was difficult to predict, as signs were mixed in some of the key markets in Asia, such as China and India.

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In China, ongoing COVID-19-related lockdowns and an economic slowdown continued to impact demand for fuels and base oils. Nevertheless, buying interest for imports has started to pick up ahead of the Golden Week holiday celebrated in China on Oct. 1-7. Given that some indications have started to edge up in Northeast Asia, consumers worried that prices might be higher after the holiday period and have come back to the market. While a large portion of the country’s demand can be met through base stocks produced at local plants, there was still a shortage of certain cuts, such as the Group I high-viscosity grades and bright stock. Additionally, the government’s crackdown on some refiners due to tax issues has also led to unplanned shutdowns or reduced operating rates at several facilities.

Chinese buyers have secured some Group I cargoes from Thailand and Japan, but a turnaround at a Thai facility in October, an ongoing turnaround in Japan since late August, a third maintenance program at another Japanese facility in October, together with the permanent closure of a Japanese plant earlier this year also led to reduced Group I availability in the region, despite the fact that the shuttered plant’s capacity was relatively small.

There continued to be competition of Chinese importers with Southeast Asian buyers for base oils produced in Thailand, Singapore and other countries in the region, but Southeast Asian buyers enjoyed the advantage of proximity and more favorable freight rates. Lingering logistics issues, together with recent port closures and disruptions caused by typhoons in China have also thwarted the conclusion of some import/export transactions. There was keen buying interest observed from buyers in Vietnam, the Philippines, Indonesia and other Southeast Asian nations as well, diverting some of the available Southeast and Northeast Asian cargoes to those countries.

Chinese importers have turned to imports of API Group II base oils from Taiwan. The Taiwanese producer routinely ships large volumes to China but had cut back shipments in recent months due to muted demand and low prices. However, it appears that more cargoes will be moving from Taiwan to China this month, reducing the number of Taiwanese parcels that had been moving to India and other destinations in Asia and even the Americas.

There were also discussions of base oil shipments originating in the Middle East moving to China, with an 8,000-metric ton parcel quoted for shipment from Ruwais, Qatar, to Nantong in mid-October. A 3,000-metric ton lot was being discussed for shipment from Hong Kong to Tianjin in early October as well.

The Chinese government appeared to envision a pick-up in demand for fuels in the fourth quarter, or at least, increased opportunities to export refined products. Three Chinese state oil refineries and a private refiner were heard to be considering increasing runs by up to 10% in October from September, with the intent of supporting stronger demand and a possible surge in fourth-quarter fuel exports, Reuters reported. Beijing apparently plans to increase fuel exports to prop up a sagging economy, but this would also bring more product into the market and depress global pricing.

In India, there was a moderate upsurge in requirements as some buyers returned to the market to secure fresh cargoes, following several weeks of subdued consumption due to monsoons and logistical difficulties brought about by the adverse weather and flooding. Demand typically also increases ahead of one of the most important cultural holidays in India on Oct. 22-26, the Festival of Lights or Deepawali/Diwali.

While buyers seemed anxious to secure product as prices have started to move up and there was a tightening of supplies in Asia, they were also conservative in terms of pricing and resisted some of the higher offers for product from different origins. This exerted downward pressure on pricing. Domestic demand was deemed sufficient to cover a large part of the requirements, but imports continued to be essential for Indian blenders to maintain high manufacturing rates, although a global shortage of additives continued to affect operations.

Nevertheless, imports of Group III base oils remained strong in India due to the deficit of local production of these cuts and a growing need to utilize high performance base oils for lubricants that can meet stringent emissions specifications. However, an Indian refiner was expected to start production of Group III base oils next year. A number of base oil cargoes were heard discussed in shipping circles, with an operator looking to move 8,000 metric tons of base oils from Ruwais to Mumbai in October. A 4,600-metric ton cargo was quoted for shipment from Shanghai, China, to West Coast India in the second half of September.

There were also a couple of shipping inquiries reported that involved moving Asian product to the U.S. A 2,000-metric ton parcel was discussed for shipment from Singapore to Houston in Sep., while a second cargo of 5,000 metric tons was mentioned for lifting in Ulsan, South Korea, to Houston in October.

Spot base oil prices were stable to firm this week, with one of the Group III ranges seeing small upward adjustments on higher bid and offer levels and tight supply. 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 largely unchanged week on week. Spot prices for the Group I solvent neutral 150 grade were assessed at $1,020/t-$1,050/t, and the SN500 at $1,210/t-$1,250/t. Bright stock was holding at $1,280/t-$1,320/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were steady at $1,140/t-$1,180/t, while the 500N was holding at $1,170/t-$1,210/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $870/t-$910/t, and the SN500 was hovering at $990/t-$1,030/t. Bright stock prices were unchanged at $990/t-1,040/t, FOB Asia.

The Group II 150N was steady at $950/t-$990/t FOB Asia, and the 500N and 600N cuts were also unchanged at $1,020/t-$1,070/t, FOB Asia range.

In the Group III segment, prices were stable to firm, supported by healthy buying interest. The 4 centiStoke was assessed higher by $20/t at $1,530-$1,570/t on tighter supplies, and the 6 cSt was holding at $1,490/t-$1,530/t. The 8 cSt grade was assessed at $1,210-1,250/t, FOB Asia, for fully approved product.

Upstream, crude oil futures inched up on Thursday on prospects of higher Chinese crude demand to increase refinery runs, along with geopolitical tensions in several areas of the world, including the ongoing Russian war on Ukraine. Futures had slipped by 1% in the previous session due to the announcement of increase rates by the U.S. Federal Reserve.

On Sept. 22, Brent November futures were trading at $91.19 per barrel on the London-based ICE Futures Europe exchange, from $93.47/bbl on Sept. 15.

Dubai front month crude oil (Platts) financial futures for October settled at $87.40 per barrel on the CME on Sept. 21, compared to $90.64 on Sept. 14.

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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