Asia Base Oil Price Report

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Supply and demand in Asia seemed to be better balanced than in the previous two months, when tepid requirements had led to a lengthening of supplies and weakening values. A number of refiners have dialed down production rates and there has been an uptick in consumption in a few countries, which helped mitigate the oversupply conditions. However, some base oil cuts have started to succumb to downward pressure on account of waning buying interest.

Both buyers and sellers typically try to lower inventories ahead of year-end to avoid tax repercussions, and this contributed to the lengthening of supply levels as consumers worked down existing inventories and limited fresh orders. At the same time, many buyers had postponed acquiring product for as long as possible and were now returning to the market as stocks have been depleted.

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Negotiations for next year’s term contracts were heard to be ongoing, and there appeared to be a tendency to secure more volumes under contract than in years past as consumers have been spooked by the sharp spot price fluctuations observed during the year. Buyers appeared eager to avoid exposure to these price swings and to potential product shortages, therefore opting for a more balanced mix of spot and contract cargoes.

Ongoing COVID-related restrictions in China and protests against the stringent implementation of lockdowns have led to uncertainty about lubricant demand prospects in that country. The population’s mobility has been curbed by the government-imposed restrictions and this has affected fuels and lubricants consumption. However, a certain sense of optimism emerged this week as the cities of Guangzhou and Chongqing announced an easing of COVID curbs, Reuters reported.

Additionally, as some Chinese base oil plants returned to production after being shut down for various reasons – including tax issues and weak demand – domestic supply has increased, which has taken away some of the pressure to find suitable imports. Even so, China continues to have a structural deficit of the heavy-viscosity grades and there was still keen interest in imports of these cuts. There were discussions to move a 2,400-metric ton cargo made up of two grades from Ulsan, South Korea, to Zhuhai in mid-December. A second 2,500-metric ton lot was mentioned for shipment from Yeosu, South Korea, to Tianjin in the first half of December.

The API Group I segment showed snug conditions in Southeast Asia on the back of recent and ongoing turnarounds at two Thai base oil plants and the permanent closure of a Japanese unit. One of the Thai plants was heard to have been restarted, which participants hoped would bring additional product into the supply system. There has been healthy buying appetite for bright stock, and the prevailing snug conditions have led to higher supplier offers, with numbers edging up from a week ago and hovering closer to the higher end of the prevailing price range. Demand for heavy-viscosity grades – bright stock in particular – from China have helped buoy prices as well.

On the other hand, there appeared to be plentiful availability of the Group II light-viscosity grades, which was exerting downward pressure on pricing. While there was buying interest for these products in other regions such as Latin America, a lack of vessel space on certain routes and steep freight rates hampered the conclusion of some of the proposed transactions. It was heard that at least one Northeast Asian Group II producer had lowered its production rates by 10% to 20% on account of the mounting supply levels. Other producers in the region have also trimmed run rates in recent weeks.

Group III cargoes continued to move steadily within the region, and availability of most grades was deemed adequate, although the 4 centiStoke grade was still reported as tight given that demand from automotive applications has increased in the last couple of years.

In India, buyers preferred to rely on domestic supplies, which have been ample, rather than risk the possibility of securing imported cargoes at a given price level, only to see values fall later when the product arrived in India. Unlike previous years, United States product did not feature prominently among the base oils moving into India during the last quarter of the year as prices were difficult to align and freight rates remained at lofty levels. There continued to be imports from Northeast Asia, Europe and the Middle East, but consumers appeared more inclined to use up existing stocks or purchase from the local suppliers. Reduced production of bright stock at one of the local refineries has placed upward price pressure on this particular cut.

Asian spot base oil prices were assessed as mostly steady this week, although there was some pressure on the light grades. 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 softer 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 was hovering at $1,270/t-$1,310/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed slightly lower by $10/t at $1,080/t-$1,120/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, and the SN500 was also steady at $910/t-$950/t. Bright stock prices were unchanged at $990/t-1,040/t, FOB Asia.

The Group II 150N was assessed at $910/t-$950/t FOB Asia, and the 500N and 600N cuts were holding at $960/t-$990/t, FOB Asia.

In the Group III segment, prices were steady. The 4 cSt was heard at $1,530-$1,570/t, and the 6 cSt was gauged 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.

Upstream, crude oil prices jumped on Thursday following a lifting of COVID restrictions in two major cities in China and a weakening of the U.S. dollar on expectations that the U.S. Federal Reserve might ease its interest rate hikes.

On Dec. 1, Brent February 2023 futures were trading at $86.87 per barrel on the London-based ICE Futures Europe exchange, from $85.09/bbl for January futures on Nov. 24.

Dubai front month crude oil (Platts) financial futures for December settled at $80.46 per barrel on the CME on Nov. 30, compared to $77.61/bbl on Nov. 23.

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.

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