Suppliers have their sights set on September, hoping that the end of the rainy season in some parts of the region and the arrival of Fall in others would spur base oil and lubricant demand. Activity has been lackluster in Asia over the last several weeks, and this exerted downward pressure on many base oil grades, with the exception perhaps of the heavier grades, which were in shorter supply. Volatile crude oil prices and lower gasoil values made buyers cautious, and they preferred to wait for more concrete signs of base oil price direction before committing to additional cargoes.
Discussions for September shipments were still generally muted, but there were expectations that buyers in China would return to the market to replenish stocks ahead of the week-long National Day in early October, in preparation for a potential uptick in lubricant and fuel demand, boosted by increased travel over the festive period, although economic uncertainties were expected to dampen activity.
Import business has generally been subdued in China this month as many buyers relied more heavily on domestic production of base oils. Output of the light grades was heard to be outstripping demand, but the heavier cuts were still scarce, prompting importers to look for regional availabilities. Some plants were heard to be running at reduced rates due to weak market economics, but were expected to resume full production, allowing for additional product to enter the domestic supply system. The restart of an API Group II unit at the end of August, following a shutdown since June, should add to the existing supply as well. Domestic values have been under pressure and producers have generally lowered their prices to capture business.
Within the Group I segment, bright stock was still tight, while demand for this grade remained steady in India and China. Group I supplies from Southeast Asia, particularly Thailand and Indonesia, have become slightly more available than in recent months but attracted lukewarm buying interest given generally subdued conditions in China.
A turnaround at an Indonesian plant scheduled for October has been delayed, which should allow for additional product to be available over the next few weeks, although most of Group I grades produced in Southeast Asia are used for domestic lubricant production, and generally sluggish demand offset any supply disruptions.
In the Group II segment, import discussions in China were faint because of plentiful domestic supplies and sluggish consumption over the past several months. Additional offers of Group II grades were expected to come from South Korea, following a quiet holiday week, with the lighter grades deemed more abundant than the lighter cuts.
A Chinese Group III producer was heard to be offering competitive local pricing to stave off imports of Middle East product, and the supplier has been able to maintain consistent on-spec production of Group III grades, which has allowed it to gain market share. Prices for imports have been holding as values need to reflect high freight rates and other costs.
There were expectations that Group III availability would be tightening in Asia as the PatraSK plant in Dumai, Indonesia (a joint venture between PT Pertamina and SK) was expected to have started a turnaround this month. The producer was heard to have built inventories to cover term obligations, but spot volumes were expected to be curtailed. Sources expected fairly limited impact on availability because of the turnaround, as demand has also softened in recent weeks.
S-Oil scheduled a one-month turnaround at its Onsan, South Korea, plant, starting in September, which might affect spot availability of groups I, II and III, but the producer was expected to build inventories ahead of the outage to meet contractual obligations.
Meanwhile, availability of Group I grades from Southeast Asia was also considered limited, although there have been more Thai volumes on offer this month. Group I exports from Japan also became very sporadic, as the country consumes most of its base oil output, particularly as volumes have decreased with recent decommissioning of refineries and the permanent closure of two Eneos base oil plants in the last two years.
Additionally, lubricant shipments from Idemitsu Kosan’s Chiba refinery have been suspended following a fire that broke out at the lubricants production unit on July 2, but other facilities including a crude distillation unit had continued to operate after the incident, according to media reports. It was unclear when lubricant shipments would resume, but there were indications that production at the base oils unit would not restart until later this year.
Some attention in Japan turned to forecasts of Typhoon Shanshan, which was expected to approach western and eastern parts the country and bring strong winds, heavy rain, flooding and possible landslides from Tuesday through Thursday. The Central Japan Railway Company said it might have to suspend or cancel some of its train services due to the typhoon.
In India, lubricant demand was not anticipated to increase significantly until the monsoon season was over and industrial, automotive, construction and agricultural activities resumed their regular pace. Given lower demand for base oils and the fact that most buyers had built inventories ahead of the rainy season, buying interest in imports has been lukewarm in India, although there were several transactions involving Middle Eastern and South Korean products concluded this month. The price of imports was generally stable for Group I and Group II grades, but Group I bright stock CFR India indications saw moderate increases of about $10 per metric ton on limited availability.
Buyers in India have also been able to meet their requirements by securing domestic product. With the exception of one refiner who was expected to start a turnaround this month, most base oil plants were heard to be running well. There were reports that Indian Oil Corp. would be shutting down its Group I and Group II units in Haldia for maintenance some time in August, but direct producer confirmation could not be obtained.
In shipping circles, approximately 5,000 tons of base oils were discussed for shipment from the Middle East to West Coast of India at the end of August. A 3,000-ton cargo was also expected to be shipped from Mumbai to Jebel Ali in the United Arab Emirates in late August. A 10,000-ton cargo was mentioned for shipment from South Korea to Antwerp-Rotterdam-Amsterdam between mid-August and mid-September. A 1,000-ton parcel was expected to be lifted in Antwerp for Ho Chi Minh City, Vietnam, or Merak, Indonesia, between August 20 and 30. A 2,000-ton lot was on the table for shipment from Daesan, South Korea, to Taiwan the first half of Sep.
Prices
Base oil spot prices in Asia were stable-to-soft, with some values seeing downward adjustments on lengthening supplies and subdued buying interest. 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 stable-to-soft. The Group I solvent neutral 150 grade was assessed down by $10/t at $870-910/t, but the SN500 was holding at $1,040-1,080/t. Bright stock edged down by $10/t to $1,250-1,290/t, all ex-tank Singapore.
Prices for the Group II 150 neutral were holding at $940-980/t, and for the 500N at $1,050-1,090/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 moved down by $10/t to $710-750/t, but the SN500 was unchanged at $910-930/t. Bright stock prices were heard at $1,050-1,090/t, FOB Asia.
The Group II 150N was holding at $750-790/t FOB Asia, and the 500N was steady at $910-950/t FOB Asia.
In the Group III segment, 4 cSt, 6 cSt and 8 cSt prices were adjusted down as they succumbed to downward pressure on lengthening supplies in some countries. The 4 cSt grade was down by $10/t at $1,130-1,170/t, and the 6 cSt was also assessed down by $10/t at $1,140-1,180/t. The 8 cSt cut was down by $10/t as well at $1,020-1,060/t.
Industry players monitored developments on the crude oil front closely as oil futures displayed significant fluctuations over the last few weeks. Prices had fallen to multi-month lows the first week of August on jitters in equities market had triggered a sell-off, but the oil decreases were soon reversed on concerns about the possibility of a widespread conflict in the Middle East and potential crude supply disruptions.
Futures then fell again early last week on expectations of Israel’s acceptance of a proposal for a ceasefire, while lingering concerns about reduced oil demand from China – the world’s leading oil importer – also dragged prices down. At the same time, India’s imports were expected to grow steadily over the next few years and the country’s consumption levels could set the pace for future demand. For the time being, India has been able to import Russian crude at discounted prices due to international sanctions on Russian exports.
OPEC was gearing up for its next meeting, where the organization was expected to decide whether to extend output cuts or increase production. “The backdrop to this decision is a volatile combination of uncertain global economic conditions, fluctuating oil demand forecasts, and tightening oil inventories, particularly in the United States,” OilPrice.com reported.
On Monday, crude oil futures were trading higher on increased tensions in the Middle East, as Iran has vowed retaliation against Israel over the assassination of Hamas leader Ismail Haniyeh in Tehran.
On August 26, Brent October 2024 crude futures were trading at $79.55 per barrel on the London-based ICE Futures Europe exchange, from $79.43/bbl on August 19. Dubai front month crude oil (Platts) financial futures for September 2024 settled at $77.75/bbl on the CME on August 23, compared to $78.19/bbl on August 16.
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.