A majority of base oil facilities in the affected areas of Louisiana and Mississippi appeared to have weathered Ida with minimal damage, and most base oil units were back up and running, but power and utility outages were likely to affect some base oil shipments.

The Stolthaven terminal near New Orleans, Louisiana, which is a key distribution point for API Group III imports to the U.S. from Asia and the Middle East, declared force majeure as its operations were shut down due to a lack of electric power. Stolt-Nielsen, the company that operates the terminal, said in a statement that it expected marine operations to resume by the weekend, and the terminal operations would possibly resume within a week, although at a reduced capacity. This could result in a significant delay and backlog of shipments, market sources commented.

Asian suppliers had already actively started to look at export options to find a home for surplus volumes when supply had started to lengthen about two months ago. Several cargoes were concluded to the U.S., Latin America and the Middle East. If U.S. supply reaches critically low levels, following Hurricane Ida, suppliers were likely to be able to ship additional parcels, but the lead time would be long. Buyers in the U.S. were particularly interested in Group I and Group III cargoes, but port and transportation disruptions meant that imports would take longer than expected to arrive.

Group I availability in Asia was becoming long, as most plants in Southeast Asia and Japan were running well and there were more offers than two or three months ago, when this segment was very tight and buyers had to compete with each other to secure cargoes. For the time being, offers were abundant and fewer consumers were interested in purchasing base oils as they expected prices to fall further. There were several Thai cargoes being bandied about, but buyers were reluctant to jump at the first offer and preferred to wait for lower numbers.

In Southeast Asia, downward pressure on prices was mounting. A large refiner in Singapore was heard to have lowered its Group I prices by U.S. dollars $40-$50 per metric ton as of last week. Prices for its Group II base oils were decreased by a similar amount. This was thought to have been prompted not only by growing regional supply, but by increased production at one of its plants in Singapore.

The Group II segment remained more on the snug side in Northeast Asia because of an extended turnaround at Formosa Petrochemical‘s plant in Mailiao, Taiwan. The producer had shut down the plant in July and was anticipated to restart operations last week, but its plans were upended by a small fire at the refinery, which was put out fairly fast. Nonetheless, the restart was heard to have been delayed for several days. The unit has capacity to produce 600,000 metric tons per year of Group II grades (according to Lubes’n’Greases’ Guide to Global Base Oil Refining) and supplies base oils to the domestic market, plus China, India and other destinations as well.

China typically receives 30,000 to 40,000 metric tons per month of Taiwanese product, but shipments were reduced while the plant was undergoing the turnaround. Once the plant resumes production, more cargoes were expected to be available for China, but it remained to be seen whether the Chinese market would be able to absorb these shipments. Additionally, Chinese port operations were not back at normal levels yet, following restrictions and quarantine requirements to stamp out the spread of the coronavirus, and this could pose additional difficulties for any imports into China.

Chinese consumers have also shifted their interest towards domestic supplies, as base oil production in China has grown over the last couple of years and is expected to expand even more. As a result, instead of remaining a net importer, China has started to export cargoes to Southeast Asia and Latin America.

Aside from Taiwanese Group II supplies becoming more plentiful, there were also several offers of South Korean Group II base oils, but buying interest remained lackluster. Some of these cargoes were expected to move to India and more distant destinations.

Indian buyers were anticipated to return to be market with more enthusiasm as the monsoon season, which started in June, comes to an end this month. It usually dampens buying appetite as logistics are complicated by the heavy rains, but lubricant requirements traditionally pick up during the last quarter of the year due to special festivals and celebrations. Whether this year consumption reaches the expected levels remains to be seen, as the coronavirus pandemic has altered many of the typical market behaviors.

Demand in India was particularly focused on very light grades, with several cargoes expected to arrive from the U.S. and South Korea in the coming weeks. U.S. producers had been able to start exporting light grades as supply started to grow at home; however, given the supply and logistics hiccups caused by Hurricane Ida, there may be less U.S. product available for spot export business moving forward.

Spot prices in Asia were again stable to soft this week, depending on bids and offers and the supply levels of each grade. The ranges portrayed below have been revised to reflect discussions, deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were lower on a key supplier’s downward adjustments and mounting supply. The Group I solvent neutral 150 grade was down by $10/t at $860/t-$890/t, and the SN500 dropped by $80/t to $1,210/t-$1,250/t. Bright stock was down by $30/t at $1,650/t-$1,690/t, all ex-tank Singapore.

Prices for the Group II 150 neutral decreased by $20/t to $870/t-$910/t, and the 500N also moved down by $20/t to $1,360/t-$1,400/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was adjusted down by $20/t to $720/t-$760/t, but the SN500 dropped by a steeper $100/t to $1,100/t-$1,140/t. Bright stock fell by $50/t to $1,480/t-1,520/t, FOB Asia.

Group II 150N was down by $20/t to $730/t-$770/t FOB Asia, and the 500N and 600N cuts were down by $40/t at $1,180/t-$1,220/t, FOB Asia.

In the Group III segment, prices were stable, supported by steady demand and tight conditions. The 4 centiStoke was holding at $1,420-$1,460/t and the 6 cSt was steady at $1,430/t-$1,470/t. The 8 cSt grade was unchanged at $1,360-1,400/t, FOB Asia for fully approved product.

Upstream, crude oil futures inched higher on Thursday, supported by a significant decline in U.S. crude stocks and a weaker dollar, but gains were capped by a decision by OPEC+ to keep its promise of gradually increasing production levels. Hurricane Ida has also affected about 80% of the Gulf of Mexico’s oil and gas output and refineries in Louisiana could take weeks to restart, Reuters reported.

On Sept. 2, Brent November futures were trading at $72.06 per barrel on the London-based ICE Futures Europe exchange, from $71.53/bbl for October futures on Aug. 26.

Dubai front month crude oil (Platts) financial futures for October settled at $69.25/bbl on the CME on Sep. 1, from $69.29/bbl on Aug. 25 (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.

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