Base oil prices were exposed to upward pressure as certain market segments displayed further tightening of supplies, while crude oil and feedstock prices continued their ascent. Some attention turned to developments in Eastern Europe, after Russia attacked Ukraine, pushing crude oil values to multi-year highs and Brent to levels above $100 per barrel for the first time since 2014.
Suppliers in Asia had already started to increase their offers, given the upward movement of feedstock prices over the last two months, and with values moving up again this week, some sellers were digging in their heels and were not accepting bids below a certain level. One factor that everyone was keeping an eye on was freight, as rates have gone up dramatically and played a big role on whether buyers would be able to buy product from more distant sources. An Omicron surge in many countries was also affecting logistics and shipping schedules.
The fact that demand has started to pick up and availability of a number of base oils has become more strained offered further support to sellers’ price ideas. Upcoming turnarounds in South Korea and Southeast Asia in March and April were expected to exacerbate the snug conditions. The lighter grades appeared to be less available than the heavier cuts, as the light-viscosity base oils are more widely used during the winter months. However, purchases for the heavier grades have started to pick up the pace in anticipation of the arrival of warmer weather and oil changes.
Consumers in China in particular have started to show keen interest in the heavy grades and bright stock. While Chinese buyers had previously been able to secure cargoes from Southeast Asia, a tighter scenario in that region and the imminent turnaround at one of the base oil facilities there have left many buyers empty-handed and in need to locate a source of base oils somewhere else. Still, several discussions were heard in shipping circles that involved moving product from Southeast Asia to China. About 14,000 metric tons were anticipated to be shipped from Singapore to Guangzhou and Beihai, China, and Taichung, Taiwan, in early March. A 2,000-metric ton cargo was on the table from Sri Racha, Thailand, to Nantong, China, for late March lifting. A 8,000-metric ton lot was likely to ship from Dumai, Indonesia, to Nantong and Ulsan, South Korea. A 1,500-metric ton parcel of rubber process oil was expected to be shipped from Rayong, Thailand, to Jiangyin, China, the first week of April.
South Korean suppliers have been busy placing product within the region, with several shipments booked for Southeast and Northeast Asia. A 1,000-metric ton cargo was being discussed for shipment from Onsan, South Korea, to Singapore in first half March. A 2,500-metric ton cargo made up of three base oil grades was expected to be shipped from Onsan to Merak, Indonesia, in the second half of March. A 5,500-metric ton cargo made up of four grades was discussed for shipment from Yeosu to Taichung and Keelung, Taiwan, in early March. Another 5,800 metric tons were mentioned to cover Yeosu to Bangkok, Thailand, and Singapore in the first half of March. About 1,400 metric tons were expected to be lifted from Ulsan to Koh Si Chang, Thailand, at the end of March.
The Taiwanese Group II producer was heard to have increased operating rates at its base oil plant, following reduced rates due to a fire at the refinery in Mailiao in late January. Regular shipments to China were anticipated to resume, and it was also heard that the supplier had concluded a transaction to ship 2,000 metric tons from Mailiao to Brownsville, the United States, at the end of March.
In India, steady demand for the light grades continued to be reported, while supply appeared to be more than sufficient to cover requirements, as several cargoes have been lined up into India from South Korea, the United States and the Middle East, and there was also ample domestic supply. A 12,500- metric ton cargo was heard to have been shipped from Pyongtaek and Ulsan, South Korea, to Mumbai and Kandla in late January to early February. A 5,000-metric ton parcel was being discussed from Ulsan to Mumbai for February shipment. A 12,000 mt cargo was on the table for shipment from Onsan to Chennai, India, and/or Hamriyah, United Arab Emirates, in late February to early March.
However, once these shipments were exhausted, Indian buyers will have to step back into the market and compete with Southeast Asian and Chinese consumers, who appeared to be more willing to up their price expectations to secure product. A similar situation had emerged in the first quarter of 2021, with numbers rising steadily at that time as a result of competition among buyers to secure product in a very strained market. Lingering supply issues from the previous year during the first waves of the COVID pandemic had made it more difficult to find alternative sources of base oils. It seems that the situation is slightly different this time as there are currently other options such as importing product from Europe and the Middle East, depending on the grade. Availability of bright stock from these sources was limited, however.
From most reports, spot base oil prices in Asia were stable to firm this week, with a few of the grades more exposed to upward pressure due to the factors described above. The ranges reflect bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.
Ex-tank Singapore prices were largely unchanged week on week. The Group I solvent neutral 150 grade was higher by $10/t at $850/t-$880/t, but the SN500 was steady at $1,010/t-$1,050/t. Bright stock was holding at $1,160/t-$1,200/t, all ex-tank Singapore.
Prices for the Group II 150 neutral moved up by $10/t to $880/t-$920/t, while the 500N also edged up by $10/t to $1,080/t-$1,120/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was up by $10/t at $770/t-$810/t, and the SN500 was also higher by $10/t at $900/t-$940/t. Bright stock increased by $20/t at $920/t-960/t, FOB Asia.
The Group II 150N was steady at $820/t-$860/t FOB Asia, but the 500N and 600N cuts edged up by $20/t to $870/t-$910/t, FOB Asia.
In the Group III segment, prices were stable. The 4 centiStoke was assessed at $1,420-$1,460/t, and the 6 cSt was hovering at $1,400/t-$1,440/t. The 8 cSt grade was unchanged week on week at $1,160-1,200/t, FOB Asia, all for fully approved product.
Crude oil futures leapt to multi-year highs on news that Russia had launched an all-out invasion of Ukraine by land, air and sea – the biggest attack by one state against another in Europe since World War Two, Reuters reported. The attack fanned concerns about disruptions to global energy supply.
On Feb. 24, Brent April futures were trading at $104.47 per barrel on the London-based ICE Futures Europe exchange, from $93.74/bbl on Feb. 17.
Dubai front month crude oil (Platts) financial futures for March settled at $92.16/bbl on the CME on Feb. 23, from $90.71/bbl on Feb. 16 (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)
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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