Crude oil futures were substantially up last week but fell this week as concerns grew regarding new COVID-curbs in China, which could result in reduced demand in the world’s biggest crude importing country. A report showing a build in U.S. inventories on Wednesday weighed on prices as well.

On Nov. 10, Brent January 2023 futures were trading at $92.03 per barrel on the London-based ICE Futures Europe exchange, from $94.89/bbl on Nov. 3.

Dubai front month crude oil (Platts) financial futures for December settled at $85.48 per barrel on the CME on Nov. 9, compared to $89.60/bbl on Nov. 2.

In China, the government’s stringent zero-COVID policy led to fresh restrictions and a partial lockdown in the manufacturing hub of Guangzhou – the capital of Guangdong province, a major economic powerhouse for China. The lockdowns were expected to affect the supply chain of many goods, including computer chips and iPhones, as well as Chinese demand for crude oil, refined products and other raw materials. Additionally, several Chinese base oil plants were also undergoing maintenance or have shut down temporarily due to tax issues and lower base oils demand because of the COVID-related lockdowns.

Chinese buying interest has turned to imports of those grades that remained tight within the domestic supply system – namely the heavy-viscosity grades, and bright stock in particular – and were encouraged by climbing domestic prices, which placed some of the imports at similar price levels. There were reports that a number of regional cargoes were being discussed for shipment to China. A 1,100-metric-ton cargo was on the table for shipment from Onsan, South Korea, to Dongguan, China, in late December. A 1,500-metric ton parcel was mentioned to cover Yeosu, South Korea, to Zhenjiang between Nov. 5 and Nov. 25. A 1,000-metric-ton cargo was quoted for lifting in Ulsan, South Korea, to Tianjin in late November. A 1,700-metric ton parcel was also expected to be shipped from Ulsan to Zhuhai in late November.

Northeast Asian cargoes continued to be shipped to various destinations in Asia, allowing for more balanced supply and demand at home. A 2,000-metric-ton cargo was expected to be shipped from South Korea to Bangkok, Thailand, in mid-December. About 1,500 metric tons were mentioned for shipment from Ulsan to Koh Sichang, Thailand, in the first half of December. A 2,800-metric-ton lot made up of four grades was in discussion for lifting in Onsan and Ulsan to Singapore in late December. A 2,000-metric-ton cargo was expected to be shipped from Ulsan to Tanjung Priok, Indonesia, between mid-November and mid-December. A 3,800-metric ton parcel was discussed to be shipped from Ulsan to Singapore and/or Jakarta, Indonesia, between Nov. 5 and Nov. 25. It was also heard that 8,000 metric tons shipped from Daesan, South Korea, to Chittagong, Bangladesh, in late October. A shipment of 4,500 metric tons was quoted to be lifted in Onsan to Merak, Tanjung Priok and Gresik, Indonesia, between Nov. 20 and Nov. 24. A 2,100-metric ton parcel was mentioned for shipment from Onsan to Taichung, Taiwan, in late November.

Aside from meeting requirements within Asia, Northeast Asian suppliers have been working on finalizing export transactions into distant destinations such as the Americas, although high freight rates and a lack of vessel space was thwarting some of this business. It was heard that discussions to ship cargoes to the U.S. Gulf and the East Coast of South America were taking place this week. Looking further ahead, there was an inquiry for shipment of 8,000 metric tons from Pyontaek and/or Daesan, South Korea, to the U.S. Gulf in February 2023. 

In Southeast Asia and Japan, supply of API Group I grades remained limited given turnarounds at two Thai refineries and the permanent shutdown of a Japanese base oils plant. At least one of the Thai plants was anticipated to have been restarted this week, and the second unit was expected to return to full production at the end of the month, allowing for more product to come to the market. The dearth in Group I supplies was exacerbated by the absence of Russian material that used to be shipped to Asia before the country’s war on Ukraine and the ensuing international sanctions on Russian exports and financial transactions.

Following a flurry of activity in India in the previous week after the Diwali festival, trading was more muted as buyers preferred to work off existing inventories and rely on contractual shipments from domestic suppliers, rather than secure too many imports as prices may drop after their delivery. Domestic suppliers have also adjusted November prices down and this attracted more orders.

Nevertheless, given attractive offers from various origins, importers were heard to have finalized business involving shipments from South Korea, Thailand, Taiwan, the United States and the Middle East. About 4,000-5,000 metric tons of base oils were on the table for shipment from Yeosu, South Korea, to Mumbai in the first half of November. A 10,000-metric-ton cargo was considered for shipment from the U.S. Gulf to West Coast India this month as well.

Asian spot base oil prices were assessed as steady to firm this week on tighter supplies and higher selling indications. 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 steady to slightly higher week on week. Spot prices for the Group I solvent neutral 150 grade moved up by $10/t to $990/t-$1,020/t, while the SN500 held at $1,100/t-$1,140/t. Bright stock was assessed higher by $10/t at $1,250/t-$1,290/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 hovering 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 steady at $970/t-1,020/t, FOB Asia.

The Group II 150N was assessed up by $10/t at $890/t-$930/t FOB Asia this week, and the 500N and 600N cuts were adjusted up by $20 at the low end of the range to $940/t-$970/t, FOB Asia.

In the Group III segment, prices held steady, with demand and tight supply offering support to the current spreads. The 4 centiStoke was holding at $1,530-$1,570/t, and the 6 cSt was hovering at $1,490/t-$1,530/t. The 8 cSt grade was also steady 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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