Some suppliers held offers at steady levels during the week, but a few have increased prices of the light grades marginally given feedstock price pressure and steady demand. With diesel prices going up, refiners had a choice of continuing to feed base oil plants or redirect the flow of feedstocks into other products. Some refiners were mulling the option of dialing back base oil production rates, but most plants were heard to be running at top rates for the time being.

At the same time, many consumers were able to cover base oil needs through term contracts. Spot supply in Asia was adequate and several cargoes were also expected to arrive from sources such as the Middle East, the United States and Europe. These arrivals were likely to place downward pressure on prices. There were several cargoes concluded to India in recent weeks, for example, with a 20,000-metric ton base oils parcel expected to be lifted from the U.S. Gulf to India in early February – slightly delayed from its original loading date – and other discussions were ongoing. Several South Korean cargoes have also been lined up for Indian ports, including an 8,000-metric ton parcel expected to load in two South Korean ports for West Coast India in late January.

This week there was also talk in shipping circles of over 17,000 metric tons moving from Saudi Arabia to India in February. Sources said that given the large number of cargoes moving to India recently and scheduled to be shipped next month, the market could be soon saturated with product and not be able to absorb more until demand picked up in earnest. While base oil consumption tends to improve in February and March, this year, uncertainties surrounding the surge in coronavirus cases made projections difficult to pin down. Suppliers worried that margins would be squeezed further if crude oil values kept rising as base oil prices had declined in India in the run-up to the new year.

In China, the imminent start of the Lunar New Year, one of the most important holidays when people travel to celebrate with their families during one to two weeks, has somewhat dampened buying interest for base oils. Lockdown measures to combat the Omicron strain of the coronavirus and logistical difficulties dimmed demand prospects from downstream markets in China as well.

Chinese consumers also felt assured that domestic supply would be sufficient to cover many of their product needs when they returned to business. Nonetheless, some buying interest emerged during the week on concerns of possible price hikes after the holidays due to the rise of crude oil and feedstock costs.

With most API Group I plants in Asia not expected to shut down during the first part of the year – with the exception, perhaps, of a Thai unit scheduled for maintenance in late February – buyers have not experienced difficulties in finding the needed volumes for Group I grades in the last couple of weeks. The ample availability of bright stock had placed downward pressure on pricing, and this week, values reflected additional slides on the back of downward adjustments by a major supplier.

There were reports that the Singapore-based producer had lowered its Group I and Group II heavy-grade prices as of Jan. 21. The price of its Group I solvent neutral 500 moved down by $30 per metric ton and its bright stock fell by $90/t. The producer’s Group II 500 neutral also dropped by $90/t. Prices for the light grades were intact. Some players were surprised by the adjustments, given the upward trek in crude oil and feedstock values over the last few weeks.

Japanese refiner Eneos was expected to permanently shut down its refinery in Negishi later this year, and its Wakayama refinery in 2023 due to environmental concerns and the steady decline in domestic demand for fuels and refined products. The Negishi refinery houses a base oil unit with a capacity of 229,000 metric tons per year of Group I base oils, and the Wakayama refinery has the largest base oil plant and can produce 360,000 t/y of Group I base oils. For more information, see related article in this issue of Lube Report Asia.

The Asian Group II segment was also comfortably supplied, with Taiwanese supplier Formosa heard to have some spot cargoes available for export after its commitments to China had been met. South Korean suppliers were also able to offer extra availability. Additionally, several cargoes were on their way from the U.S. to India, where Group II supply was long as well.

The Group III sector displayed generally stable conditions, with demand deemed healthy and prices stable to slightly soft. South Korean availability was deemed ample and no turnarounds at Group III plants in that country have been scheduled until April, when a facility will be taken off line for annual maintenance. A Middle Eastern Group III facility was heard to be shutting down in March for a two-month turnaround, and while most of the output from that unit is used for the producer’s downstream lubricant blending, the company was understood to be looking for additional cargoes from other regional suppliers to help cover the shortfall during the outage.

Spot base oil prices in Asia were mixed, with some prices going up, some softening and some remaining unchanged given the different conditions impacting each market segment. The spreads portrayed below reflect bids and offers, deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were assessed as stable to soft. The Group I solvent neutral 150 grade was steady at $840/t-$870/t, but the SN500 was lower by $10/t at $1,010/t-$1,050/t. Bright stock fell by $20/t to $1,160/t-$1,200/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were stable at $870/t-$910/t, and the 500N was assessed at $1,070/t-$1,110/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $730/t-$770/t, but the SN500 was heard down by $10/t at $890/t-$930/t. Bright stock was down by $30/t at $890/t-930/t, FOB Asia.

The Group II 150N was up by $10/t at $780/t-$820/t FOB Asia, and the 500N and 600N cuts were stable at $850/t-$890/t, FOB Asia.

In the Group III segment, prices were steady to soft. The 4 centiStoke was assessed at $1,420-$1,460/t, and the 6 cSt was hovering at $1,400/t-$1,440/t. The 8 cSt grade was adjusted down by $20/t due to increased availability to $1,160-1,200/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures jumped to multi-year highs on Wednesday, with Brent flirting with $90 per barrel for the first time since October 2014, driven by rising political tensions between Russia and Ukraine and concerns about further energy supply disruptions in a tight market. However, futures fell in mid-morning trade in Asia on Thursday on profit-taking and a build in U.S. crude inventories the previous week.

On Jan. 27, Brent March futures were trading at $89.61 per barrel on the London-based ICE Futures Europe exchange, from $88.09/bbl on Jan. 20.

Dubai front month crude oil (Platts) financial futures for February settled at $86.83/bbl on the CME on Jan. 26, from $85.52/bbl on Jan. 19 (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)

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.