While much hope was pinned on China’s return to full industrial production, demand for Chinese products remains sluggish as the economies of China’s trading partners have suffered severe setbacks, despite a gradual reopening of business and easing of lockdowns. This means that consumers in other countries are not able to purchase Chinese goods, and if Chinese manufacturers produce at top rates, production will soon outpace demand.

Participants had expected China to show a steady pickup in activity as it emerged from lockdown measures in March, but levels have been less robust than anticipated.

While there have been signs of improving demand for base oils, participants had to adjust expectations to more realistic levels, and prepared for a delay of a significant uptick as many buyers continued to work off existing inventories.

Even so, Northeast Asian base oil suppliers received an increased number of product orders from Chinese buyers, as many were replenishing inventories for the coming weeks and were hoping to avoid any potential upward price adjustments. There was a general feeling that prices bottomed out and would rebound, buoyed by improved demand and stronger crude oil and feedstock prices.

Upward price pressure was more evident on the heavy-viscosity grades, which appeared to be less readily available than their light-vis counterparts.

In some cases, producers increased their offer prices, driven by the uptick in demand and the steeper raw material values seen over the last couple of weeks.

In other cases, suppliers adjusted down prices for the month of June on lingering weakness in consumption levels and uncertainties in downstream applications.

Prices were mixed for the Group I cuts, depending on the origin. Supplies from Southeast Asia were heard to have tightened on the back of healthy sales from Thailand in April and May. Another Southeast Asian supplier was heard to be in negotiations for June shipments into several destinations within the region.

While price indications from these origins were heard to be stable to firm, prices on an ex-tank Singapore basis have been adjusted down as noted in the price paragraph below.

In China, Group I supply may tighten slightly as a number of producers embark on turnarounds over the next few weeks. PetroChina has shut down its Group I plant at Dalian from mid-May until mid-July for maintenance. Sinopec had cut the operating rates at its plant in Maoming in mid-February, but it could not be ascertained if the plant would be ramping up production soon.

In the Group II segment, it was heard that Panjin Northern Asphalt also shut down its Group II plant in Panjin this week until mid-July for a scheduled turnaround.

Taiwanese producer Formosa Petrochemical Corp. lowered its domestic list prices for June transactions of Group II base oils. Formosa’s 70 neutral grade was marked down by New Taiwan Dollars (NT$) 1.2 per liter; its 150N edged down by NT$1.1 per liter, and its 500N decreased by NT$0.04 per liter.

India has typically been a magnet for surplus product from different regions, with competitive prices from the United States, the Middle East and Northeast Asia, largely allowing buyers to pick and choose their source of material.

While Indian demand has been down due to the pandemic and the accompanying economic slowdown, there has been an uptick in Indian buying interest over the last few days for deliveries in coming weeks, but it was described as much more tempered than the country’s regular requirements registered before the pandemic. This was partly attributed to the slow resumption of activities, following the easing of lockdown measures, and the arrival of the monsoon season, which can wreak havoc on logistics and transportation.

Nevertheless, aside from procuring cargoes from Northeast Asian suppliers, it was heard that U.S. producers had also lined up some Group II parcels to be shipped to India in coming weeks.

Spot prices were somewhat mixed in Asia this week. While a few cuts underwent downward revisions due to oversupply and to bring them more in line with actual market prices, others remained steady or underwent a slight upward adjustment. Most indications were based on discussions as few concluded transactions were reported.

Ex-tank Singapore assessments for the Group I solvent neutral 150 grade were down by $20/t at $490/t-$530/t this week, while the SN500 was down by $10/t at the low end of the range at $530/t-$560/t. Bright stock was heard down by $20/t at $630/t-$660/t, all ex-tank Singapore.

The Group II 150 neutral was down by $20/t to $500/t-$520/t and the 500N held steady at $570/t-$610/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was down by $20/t at $420/t-$440/t, and the SN500 was holding at $450/t-$480/t. Bright stock was assessed at $540/t-560/t, FOB Asia.

Group II 150N was steady at $420/t-$450/t FOB Asia, while the 500N and 600N cuts were adjusted up by $10-20/t to $460/t-$490/t, FOB Asia.

In the Group III segment, the 4 centiStoke was holding at $670-$710/t and the 6cSt at $680/t-$720/t. The 8 cSt grade was assessed at $660-680/t, FOB Asia for fully approved product.

Upstream, crude oil futures fell by around three percent on Thursday due to a spike in Covid-19 cases in the U.S. and India, as the ongoing pandemic was expected to continue to dampen crude oil demand, with U.S. inventories rising this week. The OPEC+ agreement to preserve output cuts through June did not help assuage oversupply concerns.

Brent August futures were trading at $39.94 per barrel on the London-based ICE Futures Europe exchange on June 11, from $39.39/bbl on June 4.

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.