Participants were also worried about crude oil and feedstock prices, with fuel values climbing and magnifying their competition with base oils in terms of refinery streams. A number of refiners opted for increasing diesel production, for example, and reduced base oil output to take advantage of the higher fuel values.

Crude oil futures steadied on Thursday after a strong rally in the previous session as concerns about reduced demand from China offset optimistic sentiment triggered by reports that the United States had exported record volumes of crude oil, while fears about a looming recession also seemed to be tapering off.

U.S. oil companies faced pressure from President Biden to sell less fuel abroad and build domestic inventories to prevent gasoline prices from increasing ahead of the mid-term elections. There was talk of possible restrictions on exports after the Saudi Arabia-led OPEC+ group recently called for a crude oil production cut.

On Oct. 27, Brent December futures were trading at $96.91 per barrel on the London-based ICE Futures Europe exchange, from $93.56/bbl on Oct. 20.

Dubai front month crude oil (Platts) financial futures for November settled at $90.92 per barrel on the CME on Oct. 26, compared to $86.92 on Oct. 19.

In China – a key base oils market in Asia – ongoing lockdowns related to the government’s zero-COVID policies have resulted in reduced movement of the population, supply chain disruptions, dampened consumer spending and massive job losses. This had translated into lackluster buying interest for imported base oils as lubricant manufacturers preferred to work down existing inventories and rely more heavily on domestic supply. However, several Chinese base oil plants were heard to have cut back operating rates on tax inspection issues and a lack of demand for base stocks. The heavy grades were particularly in short supply as there is an endemic deficit of these cuts in China. Prices for domestic product have moved up as well, and this has made imports more attractive.

There were indications that October and November would see an increase in imports from Taiwan, as the sole Taiwanese API Group II producer has been able to stockpile base oils, following several months of tight supply levels given foregoing production issues and strong demand from other Asian nations. Chinese buying interest had been weaker, and the Taiwanese producer had been forced to look for opportunities elsewhere. However, the tide seemed to have turned and more volumes were earmarked for shipment to China this month, although shipments to other countries also continued.

Northeast Asian producers kept eyeing opportunities in more faraway destinations such as the Americas, but slowing demand, low bids and high freight rates were thwarting the conclusion of some of these transactions. Nevertheless, it was heard that a 4,500-metric-ton parcel was expected to be shipped from Ulsan, South Korea, to Ecuador in November.

Several cargoes were heard to have been transacted into Southeast Asia as well. A 1,100-metric ton cargo was mentioned for shipment from Ulsan to Singapore in mid-November. About 4,000 metric tons of C9 and base oils were expected to be shipped from Yeosu, South Korea, to Vietnam in the first half of November. About 2,000 metric tons were being discussed for shipment from Onsan, South Korea, to Singapore in early December, while another cargo was being considered to be lifted in Ulsan for Singapore between Dec. 5 and Dec. 9. A 3,000-metric-ton cargo was on the table for shipment from Hong Kong to Ulsan in late November. A 2,500-metric-ton lot was expected to be lifted in Mailiao, Taiwan, for Singapore in late November.

In the past, an increase in U.S. Group II movements to India were usual during the last quarter, as U.S. producers strove to find a home for excess base stocks and India was able to absorb large amounts of this oil. Moreover, the risk of supply disruptions due to hurricanes on the U.S. Gulf typically weakens at this time, and U.S. availability lengthens. Some potential business was being considered, but the gap between buying and selling ideas hampered some of the transactions. Additional offers from U.S. suppliers were expected in coming weeks as Group II supply in that country has grown after being on the tight side for weeks.

Buyers in India faced the dilemma of whether to acquire more product to beat possible price increases in the near term as crude oil and feedstock prices were on the rise, or be caught with high, expensive inventories if prices decline on an economic downturn and lackluster market conditions.

Indian requirements seemed to be adequately covered for the time being by domestic production of base oils, together with arriving cargoes from several sources, including Taiwan, South Korea, Thailand, Singapore and the U.S. A 5,000-metric-ton cargo was discussed for shipment from Yeosu to Mumbai in late Nov. and a second cargo was expected to be concluded from Taiwan to Pakistan and India in Nov. as well.

Reduced Group I supply from Thailand and Japan due to ongoing plant turnarounds has driven Asian buyers to search for options elsewhere. Some end-users have opted for purchasing Group II grades whenever substitution was possible, and this has led to a sudden pickup in buying interest. Bright stock is more difficult to replace and in the absence of product offers, prices have climbed. The arrival of colder temperatures in many areas was expected to dampen demand for the heavy grades. Nevertheless, some shipments were being worked on, with a 1,000-metric ton cargo of two base oil grades expected to be shipped from Rayong, Thailand, to Haiphong, Vietnam, the first week of November.

Asian spot base oil prices were assessed as stable to slightly higher 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. Spot prices for the Group I solvent neutral 150 grade were assessed at $980/t-$1,010/t, and the SN500 was unchanged 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 heard at $830/t-$870/t, and the SN500 at $900/t-$940/t. Bright stock prices were holding at $970/t-1,020/t, FOB Asia.

The Group II 150N regained lost territory and was assessed higher by $10/t at $880/t-$920/t FOB Asia this week, and the 500N and 600N cuts were up by $20/t at $920/t-$970/t, FOB Asia.

In the Group III segment, prices were fairly steady, supported by healthy demand and tight supply, especially of the 4 centiStoke grade. The 4 cSt 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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

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