Earlier this week, United States President Biden ordered the release of 15 million barrels of crude oil from the strategic petroleum reserve to be delivered in December with the intention of keeping fuel prices from climbing at home.

Oil prices were also expected to come under more upward pressure when the pending European Union embargo on Russian oil comes into effect on Dec. 5.

On Oct. 20, Brent December futures were trading at $93.56 per barrel on the London-based ICE Futures Europe exchange, from $92.50/bbl on Oct. 13.

Dubai front month crude oil (Platts) financial futures for November settled at $86.92 per barrel on the CME on Oct. 19, compared to $88.84 on Oct. 12.

Northeast Asian base oil suppliers continued to look for opportunities to move product to neighboring countries in order to achieve a more balanced supply and demand ratio. An uptick in domestic demand in some countries also helped reduce oversupply.

The sole Taiwanese API Group II producer was heard to have increased its export volumes to China this month, following a few months of reduced shipments. The increase was thought to be caused by higher supply levels at home, alongside improved buying interest from Chinese consumers as inventories have been drawn down and several base oil plants had been run at reduced production rates in China. The higher export volumes to China were also expected to reduce the availability of Taiwanese spot cargoes, with supplies heard to have been sold out through November. The Taiwanese supplier had sold several cargoes to the Middle East in recent weeks as well, and those should be arriving in the coming days.

Despite some pockets of increased buying activity, the Chinese market continued to be afflicted by uncertainties related to ongoing and fresh lockdowns as a consequence of the country’s zero-COVID policies. Large sections in major cities remain under restrictions, leading to reduced movement of the population, workforce absences and lower demand for fuels and lubricants. Ahead of the National Congress of the Chinese Communist Party that started on Oct. 16 and following the National Day holidays, people were prohibited from returning to Beijing on concerns that they would spread the coronavirus during the major convention.

Chinese buyers showed interest in securing heavy grades and Group I bright stock, as the country is structurally short of these cuts, but demand for these grades was expected to decline with the arrival of colder temperatures, when end-users change their formulations to lighter viscosities. Chinese refiners were also expected to increase base oil production as margins have improved compared to diesel. The regional prices of imported Group I base oils has fallen in recent weeks, making it more competitive against domestic values.

Availability of the Group I grades from Southeast Asia and Japan was expected to be reduced because of turnarounds at two Thai facilities and a Japanese plant. One of the Thai facilities was scheduled to remain off-line until November, but the shutdowns also coincided with a period of slower base oil demand in the region, and no shortages were expected.

Demand for Group II base oils has been less vibrant than in the first half of the year, but there were still discussions to move product within the region, as well as to more distant destinations such as Latin America. This week, a 2,000-metric ton parcel was quoted for shipment from Daesan, South Korea, to Taichung, Taiwan, in late October to early November.

In India, buyers were mostly relying on term volumes acquired from both domestic and foreign producers and also preferred to utilize existing inventories, while they were less inclined to seek imports that may arrive in a few weeks, when prices may be lower.

Several cargoes have been secured from Northeast Asia and the Middle East and they will be arriving in coming weeks, including parcels from Taiwan, South Korea and Thailand. These base oils were anticipated to satisfy a good portion of the country’s requirements. Base oil prices in Europe were comparatively high, making it difficult for European barrels to move to India at present. Northeast Asian suppliers continued to target the Indian market, but most were digging in their heels and were not accepting lower bids as they expected the market to tighten and support higher values. Additionally, some were hoping to achieve steeper values on the back of climbing gasoil prices.

There were also expectations of U.S. Group II product moving to India, now that the risk of supply disruptions due to hurricanes on the U.S. Gulf has declined and U.S. availability has lengthened despite plant turnarounds in that country. A U.S.-origin cargo that had been mentioned for shipment to India last week was heard to have been finalized and additional cargoes were anticipated to be discussed in coming weeks.

Asian spot base oil prices were assessed as stable to slightly softer this 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 held steady week on week, following downward adjustments the previous week on a major producer’s decreases and lower price discussions. Spot prices for the Group I solvent neutral 150 grade were assessed at $980/t-$1,010/t, and the SN500 was heard at $1,100/t-$1,140/t. Bright stock was hovering at $1,240/t-$1,280/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were heard at $1,090/t-$1,130/t, while the 500N was steady at $1,120/t-$1,160/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was gauged at $830/t-$870/t, and the SN500 at $900/t-$940/t. Bright stock prices were unchanged from the previous week at $970/t-1,020/t, FOB Asia.

The Group II 150N edged down by $10/t to $870/t-$910/t FOB Asia, and the 500N and 600N cuts were assessed lower by $20/t at $900/t-$950/t, FOB Asia.

In the Group III segment, prices were fairly steady, supported by healthy demand. 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 heard at $1,210-1,250/t, FOB Asia, 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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