One of the main segments suffering from the lockdown measures is the one that serves the automotive industry. Given a decrease in vehicle utilization in most countries of the region, demand for passenger car motor oils and gasoline has dropped significantly.

The drop in demand was exacerbated by the temporary suspension of manufacturing at several car plants, although some activity has been allowed to restart, with Chinese plants resuming production in early March and factories in Malaysia and India in early May.

Demand from the heavy duty segment has been stronger as trucks continued deliveries of emergency supplies, food and other necessities. As a result, diesel and lubricant consumption in this segment remained relatively steady.

Base oil producers were contending with growing inventory levels, despite production cutbacks since the second half of 2019. Most base stock plants in the region were heard to be running at reduced rates, and a number of them may even shut down on account of the dire market conditions.

In past instances where gasoil prices were more advantageous than base oil numbers, producers switched to a higher output of gasoil in detriment to base oil output, but base oils prices were considered more attractive at the moment, so this was not an option, according to sources.

Northeast Asian suppliers were heard to be looking for export opportunities in other regions as local markets were saturated with product, but producers in other regions were facing the same dilemma.

It was heard that United States producers had sold a number of cargoes to India, the Middle East and Africa at very competitive levels, but there were very few takers as storage capacity was full, and although consumers were trying to work off current inventories, it was a slow and difficult process due to the slump in demand.

There were reports that an API Group II cargo of U.S. origin had changed hands at around $400 per metric ton FOB, which was considered a fairly attractive number. It was also heard that about 11,000-15,000 metric tons were concluded ex-USG for India last week. However, it was not clear whether the cargoes had been secured by a trader for storage, or whether they would be shipped to end-users directly.

The competitive offers from the U.S. Gulf prompted South Korean suppliers to lower their prices as well. Distributors also marked down their offers, and in some instances, were heard to be willing to part ways with product at levels below those that they had originally paid for these barrels.

However, sources said that at this point, the price did not matter and it would not attract more buyers as the main problem was logistical, given the lack of storage at ports and manufacturing facilities, coupled with uncertainties about when demand would improve.

Recent and upcoming plant turnarounds were anticipated to help reduce the product overhang in coming months.

In China, PetroChina was expected to start a two-month turnaround at its Group I plant in Dalian, starting the first week of May.

Japanese producer JTXG Nippon Oil was expected to shut down its Group I plant in Kainan for forty-five days in May, and conduct a turnaround at its Negishi Group I plant in September. JTXG also completed a maintenance shutdown at one of its Group I plants in Mizushima in March.

In Singapore, Shell was expected to have taken its crude distillation unit in Pulau Bukom, Singapore, off-line for maintenance in mid-April until the end of May. The refinery produces Group I base oils.

Aside from the slump in demand, base oil prices were also exposed to downward pressure due to crude oil prices, which were still hovering at historical lows this week, having collapsed to first-time ever negative figures the previous week.

Oil futures faced downward pressure due to the ongoing demand destruction brought about by the pandemic, but numbers rose on Thursday as U.S. crude stockpiles saw a surprise decrease amid hopes of early recovery in fuel demand as lockdown restrictions were starting to ease.

The U.S. Energy Information Administration reported that U.S. crude inventories rose 9 million barrels to 527.6 million barrels for the week ended April 24.

Brent June futures were hovering at $25.30 per barrel on the London-based ICE Futures Europe exchange on April 30, up from $22.12/bbl on April 23.

Base oil price assessments were adjusted down between $10 and $50 per metric ton the previous week to reflect the steep decline in bids and offers, while the number of transactions taking place was considered negligible as most buyers were staying away from the trading scene. The price ranges portrayed below were steady to soft this week, as some spreads underwent further adjustments to reflect published ranges widely accepted as industry benchmarks.

Ex-tank Singapore Group I prices for the solvent neutral 150 grade were assessed at $580/t-$620/t, while the SN500 down by $20/t at the lower end at $600/t-$640/t. Bright stock was also down by $10-20/t at $720/t-$750/t, all ex-tank Singapore.

The Group II 150 neutral was assessed down by $10-20/t at $590/t-$610/t and the 500N was unchanged at $630/t-$660/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was down by $20/t at $480/t-$500/t, and the SN500 was also adjusted down by $20/t to $460/t-$490/t. Bright stock was revised down by $30/t to $560/t-580/t, FOB Asia.

Group II 150N was revised down by $20/t to $460/t-$480/t FOB Asia, while the 500N and 600N cuts were lower by $20/t at $490/t-$510/t, FOB Asia.

In the Group III segment, the 4 centiStoke was revised down by $10/t to $690-$740/t and the 6cSt was also down by $10/t at $710/t-$750/t. The 8 cSt grade was steady at $690-710/t, 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. 

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