More moderate activity in key base oil consumer markets such as China and India continued to place downward pressure on spot prices in Asia. Regional base oil supply was deemed plentiful, and a seasonal demand slowdown was looming, likely leading to oversupply conditions, particularly as most refineries were running at top rates. Religious holidays in several countries in Southeast Asia also dampened buying interest during the week.
Less robust economic growth than expected in China and increasing incentives for automotive electrification were impacting fuel and lubricant consumption levels, and this was also affecting base oil demand. Domestic supply of base stocks and white oils was deemed more than sufficient to cover most requirements and importers have shown subdued interest in moving large volumes into the country as costs were steep, particularly given the weakening of the local currency against the U.S. dollar. There continued to be some interest in acquiring heavier grades such as API Group I bright stock and some premium grades, as China is structurally short on those cuts. A few shipments were under discussion, with a Thai Group I cargo on the table and a 3,000-metric-ton lot mentioned for shipment from Malacca, Malaysia, to Weifang in mid-July.
In Southeast Asia, it appears that Thai plants have been running well, with production levels increasing and suppliers able to export several cargoes to destinations in the Middle East and India. A key Group II facility in Singapore was heard to have been restarted in late June after a maintenance program, which means that additional cargoes have become available in the region.
A number of maintenance programs at base oil plants will have been completed this month, allowing for more volumes to enter the system at a time when consumption levels were expected to decline, leading to excess availability of most base oil grades.
Two Group III plants – one in Europe and one in Asia – were heard to be close to resuming production, with expectations that more Group III supplies will become available in the coming months. The plant in Asia also manufactures Group II base oils.
A second South Korean producer has planned a month-long turnaround beginning in mid-August and was heard to have limited its spot shipments to build inventories and cover requirements during the outage.
A Japanese refiner was reported to have started a two-month turnaround at its Group I refinery in late May and was expected to resume production this month. A second Japanese supplier started a turnaround in April and was expected to have completed it in late June, but further details were unavailable. A Group I facility in Japan was also scheduled for permanent closure in the second half of 2023.
South Korean producers have had their hands full finalizing shipments to several destinations within Asia, but these transactions often involved small volumes. A 3,000-ton cargo made up of two grades was on the table for shipment from Yeosu to Jakarta, Indonesia, during the month of July. A 1,000-ton lot was mentioned for shipment from Ulsan to Taichung, Taiwan, in the first half of July. Another 1,000-ton cargo was also under discussion for lifting in Yeosu to Yokohama, Japan, in late August. A 1,000-ton parcel was being considered for shipment from Yeosu to Batangas, Philippines, this month as well.
A couple of Group II producers have lowered their offers to promote sales within the region, but even these incentives failed to attract strong buying interest.
Suppliers that are not typically seen offering cargoes in the merchant market were heard to have been active over the last few weeks, with Group III cargoes from a gas-to-liquids plant heard to have been offered in flexi bags at competitive levels in Asia, South America, Turkey and the United States.
In India, the monsoon season has brought heavy rains and flooding in some parts of the country such as Goa, Mumbai and Delhi. The extreme weather conditions led the India Meteorological Department to issue orange and red alerts and brought about a slowdown in transportation, construction and some industrial segments, in turn resulting in reduced base oil and lubricants demand. End-users had also built inventories ahead of the monsoon months, with many receiving cargoes under contract and less interested in spot offers. Suppliers have lowered prices, but even these incentives were not as effective as expected to increase the appetite for imports.
Local producers in India continued to enjoy the advantage of being able to refine Russian crude oil acquired at a discount and to offer base oils at lower prices. Many end-users relied heavily on domestic supplies of base oils but were also aware that several import shipments were expected to arrive from the U.S. at very competitive prices in the coming weeks. Just like the ground in several Indian states was unable to absorb more water because of the heavy monsoon rains, sources said that the Indian market was also quite saturated with base oils. Nevertheless, there were ongoing discussions involving shipments from Northeast and Southeast Asia to India. About 3,000 tons to 4,000 tons were mentioned for possible shipment from Thailand to Mumbai or the United Arab Emirates in the second half of July. A 5,000-ton to 7,000-ton cargo may be lifted from Daesan, Yeosu, or Pyongtaek, South Korea, to Chennai in late July. Another 4,000 tons of two grades were also quoted for shipment from Yeosu to Mumbai in the second half of July.
Spot base oil price assessments in Asia were steady-to-soft this week, with prices for some grades edging down due to lengthening supply and sluggish 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 softer. The Group I solvent neutral 150 grade was assessed at $870/t-$900/t, unchanged from last week, but the SN500 fell by $30/t to $960/t-$1,000/t. Bright stock was also down by $30/t at $1,190/t-$1,230/t, all ex-tank Singapore.
Prices for the Group II 150 neutral were assessed down by $30/t at $940/t-$980/t, and the 500N was also assessed lower by $30/t at $980/t-$1,020/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $700/t-$740/t, but the SN500 was down by $20/t at $810/t-$850/t. Bright stock prices slipped by $30/t to $920/t-960/t, FOB Asia.
The Group II 150N was assessed down by $30/t at $800/t-$840/t FOB Asia, and the 500N and 600N cuts also moved down by $30/t to $850/t-$890/t, FOB Asia.
In the Group III segment, prices slipped on increasing competition. The 4 cSt was assessed lower by $10/t at $1,490-$1,520/t, and the 6 cSt was also down by $10/t at $1,460/t-$1,500/t. The 8 cSt grade was adjusted down by $10/t to $1,080-1,120/t, FOB Asia, for fully approved product.
Upstream, crude oil futures have been volatile, jumping at the start of the week on news that Saudi Arabia would extend its voluntary output cuts and that its OPEC+ ally Russia would be reducing exports. However, the upswing lasted only a day, with futures slipping as analysts focused on interest rates, the possibility of a global economic slowdown, and a lower-than-expected draw in U.S. crude inventories.
On July 6, Brent crude Septemberfutures were trading at $76.57 per barrel on the London-based ICE Futures Europe exchange, from $74.34/bbl for August futures on June 29.
Dubai front month crude oil (Platts) financial futures for August settled at $76.11 per barrel on the CME on July 5, from $74.54/bbl for July futures on June 28.
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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