Asia Base Oil Price Report

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While the number of COVID-19 cases has started to fall in many countries, leading to a relaxation of pandemic-related restrictions, others were still dealing with high infection rates and disruptions to manufacturing operations and business activities. A global shortage of automotive chips was also causing temporary shutdowns at car plants, while the lack of some lubricant additives coupled with tight API Group III base oils availability was affecting synthetic lubricant production.

The snug conditions in the Group III segment were attributed to a heavy schedule of turnarounds at Group III plants in Asia and Europe during the third quarter and increased demand from the United States. Prices for these base stocks have therefore been stable to firm, and this trend continued to be supported by healthy demand in Asia and other regions.

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On the other hand, pricing for Group I and Group II grades has been on a downward slope as supply levels have improved and requirements have declined due to a seasonal pattern and a more cautious attitude from buyers. Since prices started to show signs of softening towards the end of the first half of the year, many consumers have held off on spot purchases as they expected values to bottom out at some point, and preferred to rely more on term shipments.

At the same time, a few pockets of the base oils market have shown increased activity as lubricant consumption was anticipated to pick up due to local festivals and religious holidays in the last few months of the year.

Some of the larger price decreases that have taken place were in the heavy-viscosity areas as these were the prices that had been catapulted to the highest levels during the first half of the year due to extremely tight supply and firm feedstock prices. Numbers for bright stock in particular have plunged to a much greater degree than other grades as values had taken off like a rocket in the first half of the year.

The lighter viscosity grades had also experienced significant markups, but since availability has always been more plentiful than that for their heavier counterparts, the slant of the upward movement was less steep and the drop has been therefore less extreme.

The price decreases have been quite profound in the Group I segment as availability has steadily grown with the increase in refinery run rates and the restart of several Southeast Asian and Japanese plants following turnarounds.

A number of bright stock cargoes have been available from Southeast Asian producers over the last two weeks, but most of the material has been sold. October shipments were still up for grabs, according to sources. China has a need for Group I cargoes, but persistent logistical issues and pandemic-related restrictions were thwarting negotiations.

Supply in the Group II segment remained slightly more strained as demand in countries such as India has been steady, especially for the lighter grades, and some of the imports that have in the past filled the supply gaps – such as those from the U.S. – have been largely absent. Instead, more volumes have moved from South Korea, Taiwan, the Middle East and Singapore to India in recent months.

The extended turnaround at Taiwanese producer Formosa Petrochemical’s Group II plant has resulted in more limited regional supply of Group II base stocks, and fewer cargoes moving from Taiwan to destinations such as China and India. Formosa had been expected to restart its 600,000-metric ton per year plant in Mailiao in late August, following a maintenance shutdown, but a small fire at the unit when it was on the brink to resume production prolonged the outage. There were reports that the unit may now not restart until early October, although this could not be confirmed with the producer directly. The outage takes out around 30,000-40,000 tons of Group II cargoes from the market as Formosa typically exports these quantities to countries in the region.

From all indications, there will be several base stock shipments from South Korea to India in the coming weeks. Around 16,000 metric tons were booked to be shipped to Mumbai in mid-September. A 12,000-ton cargo was being discussed for shipment from Ulsan to several ports in India for mid-October lifting, while another 5,500 tons were on the table to move to India in late October. An 11,000-16,000-ton parcel was likely to be booked from Daesan to India next month as well. All these cargoes are in addition to a couple of U.S. origin light grades and Middle East parcels moving to India in the coming weeks.

South Korean base oils were also expected to be shipped to China and Singapore in October. Several Chinese base oil plants were shut down or have extended their turnarounds, and there was still a dearth of heavy-viscosity grades since production of these cuts is not as abundant in China. However, the approach of the winter may temper demand for the heavy grades and bright stock, which are not as widely used during the low temperature months.

There were reports that a major Singapore-based producer decreased its ex-tank prices at the end of September, with bright stock experiencing hefty drops of $200 per metric ton and Group II grades adjusted down by about $80/t.

Participants have also been keeping an eye on potential weather-related supply disruptions, both in the U.S. due to hurricanes and in Asia given the typhoon season. Typhoon Mindulle was expected to make landfall in Japan on Oct. 1, but original forecasts that it would be heading directly towards Tokyo were revised as the storm was expected to only skirt the Eastern coast.

Spot prices in Asia were assessed as stable to softer this week, with the Group III segment seeing stable fundamentals. The ranges portrayed below have been revised to reflect supplier decreases, discussions, deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were mostly lower on plentiful supply and weaker offer levels. The Group I solvent neutral 150 grade was down by $30 per metric ton at $820/t-$850/t, and the SN500 also edged down by $30/t to $1,090/t-$1,130/t. Bright stock was down by $50/t at $1,480/t-$1,520/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were slightly down by $10/t at $840/t-$880/t, and the 500N was also adjusted down by $10/t to $1,320/t-$1,360/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was lower by $20/t at $680/t-$720/t, but the SN500 was assessed down by $30 at $940/t-$980/t. Bright stock fell by $20/t this week to $1,310/t-1,350/t, FOB Asia.

Group II 150N was unchanged at $710/t-$750/t FOB Asia, but the 500N and 600N cuts were down by $20/t at $1,100/t-$1,140/t, FOB Asia.

In the Group III segment, prices were stable, supported by healthy demand and tight conditions. The 4 centiStoke was hovering at $1,420-$1,460/t and the 6 cSt was steady at $1,430/t-$1,470/t. The 8 cSt grade was holding at $1,340-1,380/t, FOB Asia, all for fully approved product.

Crude oil futures trended lower after U.S. trading opened on Thursday, erasing earlier gains, on reports of higher U.S. crude oil inventories and a strong dollar, which offset earlier upward pressure on forecasts that demand would outpace supply in coming months. Futures had reached three-year highs earlier in the week on these concerns.

On September 30, Brent November futures were trading at $77.96 per barrel on the London-based ICE Futures Europe exchange, from $76.09/bbl on Sep. 23.

Dubai front month crude oil (Platts) financial futures for November settled at $74.76/bbl on the CME on Sep. 29, from $73.37/bbl for October futures on Sep. 22 (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.