A number of countries have also shown an uptick in base oil demand over the last couple of weeks, partly fueled by concerns that prices may be rising, and buyers preferred to secure cargoes before the increases were implemented. Additionally, many consumers had been relying on existing inventories and needed to replenish stocks.

In Southeast Asia, a key Group I supply hub, a number of producers were in sold out positions for spot cargoes or were able to offer limited amounts of Group I grades. This was due to recent unplanned outages and current turnarounds, coupled with steady-to-firm demand. There were expectations of an uptick in buying appetite in Thailand with the arrival of the dry season, and demand in Indonesia and Malaysia were heard to be healthy as well.

There were also several import shipments concluded to destinations within Southeast Asia, as local production was not deemed sufficient to cover consumers’ needs. Between 7,000 metric tons and 9,500 tons base oils were being discussed for shipment from Daesan and Ulsan, South Korea, to Ho Chi Minh, Vietnam, and/or Singapore and Port Klang, Malaysia. A 1,000-ton prompt cargo was mentioned for shipment from Onsan, South Korea, to Merak, Indonesia. Another 1,000 tons were likely to be shipped from Onsan to Bangkok, Thailand, in early October. A 500-ton parcel was expected to be shipped from Onsan to Ciwandan, Indonesia, in early October as well.

A Japanese Group I producer – Eneos – was also expected to have started an extended three-month maintenance program at its Mizushima-A Group I plant, and intended to idle its Group I Wakayama refinery, which houses a Group I plant, permanently in October.

In the Group II segment, the only Taiwanese producer of Group II base oils, Formosa Petrochemical, was preparing for a two-month turnaround, starting in mid-October, and building inventories to cover domestic term obligations during the outage. As a result, the producer was expected to suspend most spot exports while the plant is out of commission.

Discussions related to Group I and Group II were taking place in Asia, but limited spot availability and buyer resistance to the higher offers hampered the conclusion of some of the proposed transactions. A few consumers were looking for alternatives to Group I and may resort to Group II grades whenever formulations allowed substitutions. But Group II supplies were also tight and offers have crept up, with some South Korean cargoes being offered at significantly higher prices compared to a month ago.

Buying interest for available cargoes has picked up in India, where lubricant consumption was expected to improve as the end of the monsoon season in late September was around the corner. Revived base oil activity, together with reduced output at some facilities where refiners were favoring gasoil production, resulted in a tighter supply and demand situation and the upward movement of prices. The light-viscosity grades have tightened as they are used in fuel blending and gasoil values have jumped, encouraging consumers to secure more light base oils. As buyers have seen spot prices move up, they started to take the maximum volumes that they were entitled to under term contracts, exacerbating the snug conditions.

Spot CFR prices of Group I and Group II base oils moving into India have edged up by $10/ton to $40/ton week on week, depending on the grade, with the light viscosities seeing the biggest jumps.

Bharat Petroleum was understood to have scheduled a turnaround at its refinery in Mumbai this month which will result in a partial shutdown of the base oils plant, affecting Group II production. A producer’s confirmation of the schedule could not be obtained.

Regional suppliers were working on shipments to India, with a 5,800-ton cargo mentioned for possible lifting in Mailiao, Taiwan, to Mumbai in late September. About 10,000 tons were quoted for lifting in Daesan to Hazira and/or Mumbai and Hamriyah in late September. A 1,350-ton lot was on the table for shipment from Ulsan to Mumbai in late October.

In China, there was still subdued buying appetite for imports, particularly as growing domestic supply was able to meet most of the current requirements and economic indicators were not as robust as previously expected, dragging market activity down. There was some interest in bright stock, as the country typically suffers from a shortage of this cut, but recently concluded shipments from Thailand should meet some of these requirements.

Supplies of Group III base oil were in the spotlight with the start-up of the new

Hongrun Petrochemical base oil plant in Weifang, Shandong, which underscored the fact that China’s production of high-performance base oils is growing. This also meant that more Group III cargoes may become available in Asia in coming months, as another Group III plant was also expected to come on stream in India, and this was placing downward pressure on Group III prices.

In the meantime, participants were discussing some shipments that may be moving to China in October. About 10,000-metric tons were quoted for shipment from Onsan and Daesan to Tianjin and Zhapu in mid-October. A 1,100-ton lot was likely to be lifted in Onsan to Huizhou in early October as well.

Both buyers and suppliers in Asia kept monitoring crude oil prices, as values had jumped to 10-month highs earlier in the week and seemed to be quite volatile on Thursday. Oil prices fell in early Asian trade on the back of comments by the U.S. Federal Reserve about potential interest rate hikes before the end of the year, fanning concerns that higher interest rates would dampen economic growth and reduce crude oil demand. However, futures rebounded from $1 per barrel down to $1/bbl up on Thursday afternoon on news of a Russian ban on fuel exports.

On Sept. 21, Brent crude November futures were trading at $94.30 per barrel on the London-based ICE Futures Europe exchange, from $92.39/bbl on Sept. 14.

Dubai front month crude oil (Platts) financial futures for October settled at $92.88 per barrel on the CME on Sept. 20, from $91.94/bbl on Sept. 13.

Base oil spot price assessments were mixed again in Asia this week, with prices for a number of grades edging up, some remaining unchanged, and others moving down. 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-firm. The Group I solvent neutral 150 grade was steady at $800/t-$840/t, and the SN500 was also unchanged from the previous week at $930/t-$970/t. Bright stock was hovering at $1,070/t-$1,110/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed up by $30/t at $970/t-$1,010/t and the 500N was higher by $20/t at $1,030/t-$1,070/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was higher by $10/t at $720/t-$760/t, and the SN500 also climbed by $10/t to $850/t-$890/t. Bright stock prices were up by $20/t at $910/t-950/t, FOB Asia, with few offers heard.

The Group II 150N jumped by $40/t to $870/t-$910/t FOB Asia, and the 500N moved up by $30/t to $900/t-$940/t, FOB Asia.

In the Group III segment, 4 centiStoke and 6 cSt prices fell again this week due to plentiful supplies and competition among suppliers. The 4 cSt was assessed lower by $20/t at $1,340-$1,370/t, and the 6 cSt fell by $20/t as well to $1,300/t-$1,340/t. The 8 cSt grade slipped by $10/t to $1,060-$1,100/t, amid thin discussions and growing supply. All indications are 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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