Asia Base Oil Price Report

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Base oil prices have once again come under pressure on mounting supply, not only in Asia, but in other areas of the world as well, limiting export options for Asian suppliers to find a home for their surplus barrels in other regions and causing spot prices to slide. The situation was not uniform in the whole region, with buyers in some countries such as India still eager to acquire product – but at lower prices – while consumers in other nations showed a more prudent attitude in terms of how much material to purchase as the lubricants demand outlook was unpredictable.

Both consumers and suppliers turn more cautious during the last quarter as well as they prefer to finish the year with low inventories to avoid tax repercussions. With so many uncertainties looming on the horizon, including the threat of a global recession, geopolitical tensions between several countries, and potentially higher crude oil and feedstock costs, market participants noted that it was challenging to plan production and base stock orders for the next few months.

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Several refiners have dialed down operating rates to avoid a product overhang, and some have directed more feedstocks into the production of base oils in those countries where prices for diesel and other refined products have weakened.

This was the case in India, where availability of the light base oil grades has lengthened, and prices were exposed to downward pressure due to softer feedstock costs and less competition from the fuel side. Many buyers preferred to rely on base oil shipments under contract rather than incurring the risk of securing spot cargoes as prices were volatile.

Northeast and Southeast Asian suppliers have been hard at work finding opportunities to export their surplus barrels. India had taken many cargoes in the previous months from South Korea, China and Taiwan, but volumes were expected to recede as supplies within India seemed plentiful, although South Korean cargoes were still considered competitive and attracted keen attention, particularly against higher-priced U.S. product offers, for instance.

The sole Taiwanese API Group II supplier was heard to have increased the volumes it was shipping to China in September, in sharp contrast to the previous few months when shipments to China had been reduced. This was likely because of fresh buying interest from Chinese importers ahead of the Golden Week in October on concerns of difficulties in securing product during and after the holiday, a need to replenish stocks after a long period of subdued buying, and lower operating rates at a number of domestic plants in China.

Furthermore, maintenance programs at two Thai facilities in October, an ongoing turnaround in Japan since late August, a maintenance program at another Japanese facility in October, together with the permanent closure of a Japanese plant this month (the closure was apparently delayed from a mid-year date) also led to reduced Group I availability in the region. Some buyers acquired Group II cuts as a substitute for Group I grades whenever possible, while demand for bright stock remained steady and has even improved in China.

Group III grades appeared sheltered from the downward price pressure as demand remained steady and supplies were more limited, given lower refinery run rates and turnarounds at base oil plants in Europe and the Middle East.

There were several inquiries involving base oil shipments from Southeast Asia and Northeast Asia to ports in the area and to more distant destinations as well. A 6,000-metric ton parcel of four grades was on the table for lifting in Malacca, Malaysia, to Port Klang, Malaysia, in the first half of October. A 2,600-metric ton cargo was being considered for shipment from Port Klang to Gebze, Turkey, in October. Alternatively, a similar cargo was being discussed for shipment from Daesan or Ulsan, South Korea, to Gebze in Oct. as well. A 4,000-metric-ton cargo was mentioned for shipment from Yeosu or Ulsan, South Korea, to Mesaieed, Qatar, in the second half of October.

Export opportunities to distant destinations such as the Americas continued to pose some challenges as vessel space was difficult to secure on certain routes, freight rates were still high and buying interest has started to wane as ample supply was either due to arrive or was already in storage at distribution hubs such as Brownsville in the United States, for onward shipment to Mexico. Several cargoes had been finalized by Northeast Asian suppliers into Mexico in the previous three months. However, demand for lubricants has weakened in Mexico and this led to lackluster buying appetite for base oils and weaker pricing.

As mentioned above, Asian spot base oil prices were stable to slightly weaker on lengthening supplies and slowing demand, reversing the trend observed 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 were stable to softer. Spot prices for the Group I solvent neutral 150 grade were steady at $1,020/t-$1,050/t, but the SN500 fell by $30/t to $1,180/t-$1,220/t. Bright stock was also lower by $30/t at $1,250/t-$1,290/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were unchanged week on week 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 lower by $30/t at $960/t-$1,000/t. Bright stock prices were slightly lower by $10/t at $980/t-1,030/t, FOB Asia.

The Group II 150N slipped by $10/t to $940/t-$980/t FOB Asia, and the 500N and 600N cuts fell by $20/t to $1,000/t-$1,050/t, FOB Asia range.

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

Upstream, crude oil futures climbed on Wednesday and Thursday, as OPEC+ was considering an output cut, the U.S. dollar eased, and fuel inventories in the U.S. reflected larger-than-expected drops amid renewed demand.

On Sept. 29, Brent November futures were trading at $89.87 per barrel on the London-based ICE Futures Europe exchange, from $91.19/bbl on Sep. 22.

Dubai front month crude oil (Platts) financial futures for October settled at $86.70 per barrel on the CME on Sep. 28, compared to $87.40 on Sep. 21.

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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