Base oil prices were stable to firm in Asia, supported by a tightening supply and demand ratio amid renewed buying appetite from a few segments of the market. Crude oil and feedstock prices remained volatile, unnerving both buyers and sellers as it made forecasting difficult during a time of the year when many negotiations for next year’s supply contracts take place. Surging COVID cases in China, a devastating earthquake in Indonesia and the Soccer World Cup also captured participants’ attention this week.
Crude oil values have been on a downward spiral over the last two weeks, although they ticked up briefly on Tuesday. Futures slid again in early trading on Thursday given a build in U.S. gasoline stocks and news that the Group of Seven (G7) nations considered a price cap on Russian oil above the current market level. Given that production costs were estimated at around $20 per barrel, the proposed cap of $65-$70/bbl would still make it profitable for Russia to sell its oil and in this way prevent a global supply shortage, Reuters reported.
There were also indications that Indian refiners were scrambling to buy Russian oil before the European Union’s embargo and price cap on Russian oil go into effect on Dec. 5.
On Nov. 24, Brent January 2023 futures were trading at $85.09 per barrel on the London-based ICE Futures Europe exchange, from $92.32/bbl on Nov. 17.
Dubai front month crude oil (Platts) financial futures for December settled at $77.61 per barrel on the CME on Nov. 23, compared to $85.55/bbl on Nov. 16.
Availability of API Group I base oils from Southeast Asia and Japan has dwindled on the back of plant turnarounds, and this has helped buoy prices, particularly those for bright stock. Two Thai plants started turnarounds in October, and a Japanese plant was shut down permanently last month as well. One of the turnarounds in Thailand has been completed and the plant has been restarted, which should lead to more product coming to the market in the next few weeks. The concurrent shutdowns had led to reduced supplies of Group I grades which are typically shipped to different destinations within Southeast Asia and China, and buyers from several countries were vying to secure product as a result. A 1,000-metric ton base oil cargo was mentioned for shipment from Rayong, Thailand, to Manila, Philippines, in first half of December. Approximately 10,000 metric tons were expected to be shipped from Dumai, Indonesia, to Nantong, China, and Ulsan, South Korea, in mid Dec. About 5,000 metric tons were mentioned for shipment from Wakayama, Japan, to Hong Kong and Singapore in the first half of December.
There will be additional turnarounds in Japan in the first half of 2023, including a two-month shutdown at a Group I, II and III plant in April. Producers typically start limiting spot availability ahead of their maintenance programs in order to build inventories and cover term obligations during the outages.
Chinese demand for imports has seen a revival since October as inventories had been depleted and a number of domestic plants were still running at reduced rates or remained shut down on account of tax inspections and dwindling demand in the previous months. An unplanned outage at a plant that started in June might be extended into next year. The lower base oil consumption levels were thought to be linked to ongoing COVID restrictions and lockdowns in China, where the government insisted on carrying out stringent zero-COVID policies. The restrictions had limited mobility of large portions of the population in several big cities and industrial hubs, leading to reduced demand for fuels and lubricants.
Despite the fluctuations seen in terms of demand in China, there continued to be interest to move product from other countries, as domestic prices have also risen and this made imports more competitive, with several cargoes expected to be shipped from South Korea, Singapore and other sources. A 5,000-10,000-metric-ton lot was quoted for shipment from Daesan, South Korea, to Zhapu and/or Tianjin in mid-December. A 4,000-metric ton cargo was mentioned for possible lifting in Yeosu, South Korea, to Qingdao and Tianjin in late November to early December. About 1,000 metric tons were also quoted from Onsan, South Korea, to Dongguan in late December. About 15,000 metric tons were under discussion for lifting in Singapore to China in December as well.
South Korean suppliers have sought opportunities to export within the region, but also to more distant destinations such as Africa to keep inventories from mounting, while a couple of refiners have also reduced their run rates by 10-20%. It was heard that a 10,000-metric-ton cargo was under discussion for prompt shipment from South Korea to Lagos, Nigeria. Another 10,000 metric tons were also mentioned for shipment from Ulsan to Apapa, Nigeria, in late December. About 2,000 metric tons were expected to be shipped from Onsan to Botany Bay, Australia, in mid-December. A 1,000-metric-ton cargo was also discussed for shipment from Onsan, South Korea, to Haiphong, Vietnam, at the end of November.
In India, buyers tried to limit their purchases to smaller cargoes to meet day-to-day product needs and avoid an inventory build-up, although some consumers preferred to be well-stocked to avoid a last-minute run for product if prices were to climb. They were also securing base oils from domestic producers rather than arranging the purchase of imports that had not arrived into the country yet, as these operations involved more price risks. Storage tanks at different locations were close to capacity because imports had poured into the country, including shipments from South Korea, Taiwan, the U.S. and the Middle East. In terms of cargoes arriving in coming weeks, a 3,000-5,000-metric ton lot was mentioned for possible shipment from Mailiao, Taiwan, to Mumbai in early Dec. About 3,000 metric tons were also on the table for lifting in Ulsan to Mumbai and Jawaharlal Nehru Port Trust the first week of December. Another 5,000 metric tons were likely to move from Yeosu or Ulsan to Mumbai in late December. About 3,000 metric tons were discussed for shipment from Malacca, Malaysia, to Mumbai or Hamriyah, United Arab Emirates, in late November.
Asian spot base oil prices were assessed as steady to firm this week on tightening supply versus demand. The price 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 from the previous week. Spot prices for the Group I solvent neutral 150 grade were heard at $990/t-$1,020/t, while the SN500 held at $1,100/t-$1,140/t. Bright stock moved up by $20/t to $1,270/t-$1,310/t, all ex-tank Singapore.
Prices for the Group II 150 neutral were holding at $1,090/t-$1,130/t, while the 500N was unchanged at $1,120/t-$1,160/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was holding at $830/t-$870/t, but the SN500 edged up by $10/t to $910/t-$950/t. Bright stock prices moved up by $20/t to $990/t-1,040/t, FOB Asia.
The Group II 150N was assessed higher by $20/t at $910/t-$950/t FOB Asia, and the 500N and 600N cuts also moved up by $20/t to $960/t-$990/t, FOB Asia.
In the Group III segment, prices were unchanged week on week. The 4 centiStoke was heard at $1,530-$1,570/t, and the 6 cSt was assessed at $1,490/t-$1,530/t. The 8 cSt grade was holding 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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