Availability of a number of base oil grades continued to tighten, as weather-related output and transportation disruptions in the United States, South Korea and Taiwan resulted in delayed or reduced volumes moving to destinations throughout Asia.
The sector that appeared to have become most constricted was the API Group II segment, as Hurricane Laura had caused plant shutdowns in the U.S. – which had until recently been shipping significant quantities to Asia – while Typhoon Haishen in South Korea and Typhoon Maysak in Taiwan have led to port closings and shipment delays.
Typhoon Haishen hit the Japanese island of Kyushu and the South Korean peninsula on Sept. 7, causing power outages and structural damage to roads and other infrastructure. South Korean producers SK Lubricants, S-Oil, GS Caltex and Hyundai Oilbank-Shell were all watching the storm very closely, but none reported reduced operating rates or shutdowns ahead of the storm.
Several South Korean ports closed in preparation for the typhoon, forcing loadings to halt until after the storm. Although shipments were anticipated to be delayed, liftings resumed by Tuesday. This was the second port closing in a week, as coastal operations also shut down ahead of Typhoon Maysak, which pummeled South Korea and Taiwan the previous week.
“All conditions of the plants in Korea returned to normal immediately after the typhoon, and they began loading as usual,” a source familiar with base oil operations commented following Haishen.
In Taiwan, Typhoon Maysak also prompted port closings and other preventative measures, resulting in port congestion and shipment delays.
In the U.S., Hurricane Laura, which made landfall on Aug. 25, triggered serious output disruptions, with the Excel Paralubes Group II plant in Westlake, Louisiana, still reported off-line this week due to a power outage and some structural damage. The unit was expected to remain down for several weeks.
The largest Group II producer in the U.S., Motiva, also shut down its refinery in Port Arthur, Texas, temporarily ahead of the storm, but was able to restart operations over the weekend.
Despite South Korean plants escaping the severe weather seemingly unscathed, buyers in India and other countries, which typically receive significant Group II volumes from South Korea and Taiwan, turned to other sources to cover potential shortages.
However, most of their usual suppliers did not have large amounts of product to offer. In fact, U.S. Group II suppliers were heard to have withdrawn all September spot offers for the time being, as producers focused on meeting domestic contractual obligations.
Some U.S. cargoes shipped to India in August and were anticipated to reach Indian shores this month, but buyers started to worry about supply in coming weeks.
Contrary to information from outside sources, Bahrain Petroleum Co.’s Group III base oil plant in Bahrain is processing base oil at normal levels. There is a maintenance program scheduled at the Bapco refinery in October; however, it will take place in areas that do not impact the base oil unit, base oil production or deliveries.
Another Middle East producer has shipped significant volumes of Group III grades to the U.S. in recent months, limiting the amounts of product available for other regions.
Group I base stocks have also shown limited availability in Asia, and there were few options for those buyers seeking extra barrels, as European supply was also tight and production shutdowns in Asia were limiting availability even further.
Hindustan Petroleum in India was reportedly getting ready to take its Group I, II and III plant off-line for a two-month turnaround in the second half of September, while the S-Oil plant in South Korea was also undergoing a maintenance program that affected Group I and II output.
In Saudi Arabia, a Group I and II producer has also slated a turnaround starting in early October.
At the same time that Group I supplies were tightening, demand in China was weakening, and domestic production has also increased. The slowdown is partly attributed to seasonal conditions and reduced demand for Chinese manufactured goods in export markets. Domestic prices were also heard to be losing ground.
Spot base oil prices in Asia were steady to firm week on week, but could face pressure if crude oil and feedstock prices continue on a downward trend. However, tightening supply in certain pockets of the market may offset the downward pressure, as was the case this week, with some prices moving up on the back of steeper offers due to reduced availability.
Ex-tank Singapore assessments for the Group I solvent neutral 150 grade were unchanged at $490/t-$530/t, and the SN500 was steady at $585/t-$625/t. Bright stock was assessed at $675/t-$710/t, all ex-tank Singapore this week.
The Group II 150 neutral was higher by $10/t at the top end of the range at $500/t-$530/t, and the 500N was heard at $660/t-$690/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was heard at $420/t-$440/t, and the SN500 was holding at $500/t-$540/t. Bright stock was firm at $590/t-630/t, FOB Asia.
Group II 150N was adjusted up by $10/t to $460/t-$490/t FOB Asia, while the 500N and 600N cuts were higher by $5/t at $545/t-$585/t, FOB Asia.
In the Group III segment, the 4 centiStoke was assessed at $680-$720/t and the 6cSt at $690/t-$730/t. The 8 cSt grade was stable at $670-690/t, FOB Asia for fully approved product.
Crude oil futures plummeted to the lowest levels in three months on fears about reduced oil demand in coming months, as the U.S. driving season has come to an end, and jet fuel consumption has not recovered from the negative effects of the pandemic. Concerns were stoked by Saudi Arabia’s sharp reduction of the official selling price of crude into Asia and the U.S.
On Thursday, Sept. 10, Brent November futures were trading at $40.68 per barrel on the London-based ICE Futures Europe exchange, from $43.62/bbl on Sept. 3.
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.