However, most small plants have come back on line, and a major exporter to China, Formosa Petrochemical Corp., restarted its API Group II plant in Mai-Liao, Taiwan, last week, following a scheduled 45-day turnaround. The maintenance shutdowns at this facility are scheduled every other year.

Given the plant’s restart and increased rates at local facilities, market observers were skeptical that the tight market conditions would persist in China in the next few weeks as more spot volumes were expected to become available.

At the same time, another large producer of Group I and II base oils – which are the least readily available grades in the region – was preparing to start a turnaround in South Korea. S-Oil confirmed that it would be starting a planned maintenance program at its Group I, II, and III complex in Onsan at the end of August that will last until mid-September. The shutdown would only affect Group I and II production, and the producer has built inventories to cover contract obligations during the outage.

However, there were expectations of tightening spot supplies of Group I and II grades in Asia and the Middle East due to the turnaround, and this may translate in added export opportunities for countries such as the U.S. and South Korea.

Additionally, given the fact that almost no Group I cargoes have been exported from Iran due to international sanctions on Iranian oil exports, and a worldwide rationalization of Group I production, availability of Group I in countries such as India – which used to import significant amounts of Iranian Group I cuts – and China has tightened significantly, driving many end-users to seek Group II alternatives.

Currently, there is also a shortage of Group I cuts in Europe and supply in the U.S. is snug, leading to increased export prices at most origins. Availability from Thailand was also said to be limited and no spot transactions have been finalized for September, following the conclusion of August business.

A Group I plant in Singapore was heard to remain off-line, prompting several shipments of Group I base oils from Europe to Singapore. Ex-tank Singapore prices for Group I supplies have firmed.

Within the Group I segment, bright stock is difficult to replace in certain downstream applications, and the cut was therefore still in high demand and deemed quite difficult to source. As a result, prices have climbed in recent weeks.

In India, Group II light grades remained very sought-after, but several cargoes have moved there from the U.S. in June, with arrival expected in late August and early September. A number of additional parcels were heard to have been concluded for shipment during August. Several Middle East shipments of Group II products were anticipated to be making their way to India this month as well.

Regional suppliers were also looking at placing Group II cargoes into India as Chinese demand has tapered off, and these sellers were in need of a new home for their cargoes, but it was not clear whether their offers would be competitive. There appeared to be plenty of Group II availability from South Korea for the time being, but this could change once S-Oil starts its turnaround.

While regional demand for most base oils has improved since May, when several countries started to ease coronavirus-related lockdowns and plant shutdowns, it was challenging to ascertain whether base oil and lubricant consumption would remain healthy in the next few months, as countries continued to have difficulties wrangling the virus.

Even economies that had lifted restrictions have had to reverse some of their actions. In South Korea, for instance, facilities that are considered high risk such as nightclubs, karaoke bars and restaurants serving buffet-style were shut down in Seoul in the past week.

These setbacks and the more limited movement of the population in many countries of the region have had serious economic repercussions for segments such as the automotive industry, and this, in turn, has resulted in a sharp drop in fuels and lubricants consumption. This situation was further exacerbated in India by the heavy monsoon rains.

However, base oil prices in India have climbed given renewed buying interest in June and July, and were hovering at steeper levels than in other countries of the region.

Conversely, in China, the automotive industry has shown a recovery from its depressed performance levels earlier this year. China’s 11 major auto makers saw their output expand in the first 10 days of August, according to Xinhua News, which was quoting industry data.

The output of these carmakers totaled 473,000 units, up 11.2% year on year, according to a report released by the China Association of Automobile Manufacturers. However, the figure marked a 24% decline compared with that seen in the first 10-day period of July, the Xinhua article added.

Spot prices in Asia were assessed as generally stable to slightly higher this week, with small increases achieved on a number of grades given current tight conditions.

Ex-tank Singapore assessments for the Group I solvent neutral 150 grade were steady at $490/t-$530/t, but the SN500 was assessed higher by $5/t at $585/t-$625/t on current fundamentals. Bright stock was steady at $665/t-$700/t, all ex-tank Singapore.

The Group II 150 neutral was unchanged at $500/t-$520/t, and the 500N was holding at $660/t-$690/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was stable at $420/t-$440/t, but the SN500 moved up by $20/t to $500/t-$540/t on tight conditions. Bright stock was holding at $580/t-620/t, FOB Asia.

Group II 150N was steady at $440/t-$470/t FOB Asia, while the 500N and 600N cuts were assessed higher by $10/t at $530/t-$570/t, FOB Asia.

In the Group III segment, the 4 centiStoke was hovering at $680-$720/t and the 6cSt at $690/t-$730/t. The 8 cSt grade was steady at $670-690/t, FOB Asia for fully approved product.

Upstream, crude oil futures trended lower on Thursday on ongoing concerns about crude demand, given the resurgence of coronavirus cases in many countries and the high number of infections in the U.S., against the possibility that OPEC+ would decide to increase output in coming months.

On Thursday, August 20, Brent October futures were trading at $44.93 per barrel on the London-based ICE Futures Europe exchange, from $45.52/bbl on August 13.

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. 

Historic and current base oil pricing data are available for purchase in Excel format.