Pockets of brisk activity occurred in most countries in Asia, while others started to feel the typical slowdown of the weeks leading to the year-end holidays. In petrochemical stock markets, prices were up earlier in the week on optimistic sentiment as Joseph Biden Jr. was appointed president-elect of the United States, following a contentious election.
Demand for base stocks continues to be described as quite strong in India, despite the imminent start of the Diwali festival, with buyers looking far and wide for product as spot supplies from the United States have mostly dried up, with the exception perhaps of one or two cargoes that have been concluded over the last two weeks. It was heard that a large U.S. API Group II producer had sold about 10,000-metric tons to India, which was due to be lifted this week. This sale allowed the supplier to gain a more balanced supply position, according to sources.
Other U.S. producers largely focused on domestic contract business and had very little spot material to offer. This situation was partly the result of hurricane-related outages between late August and October. While most of the plants increased operating rates or restarted production, inventories remained low.
Domestic Indian base oil supply has also been curtailed due to maintenance programs at a couple of local plants. At the same time, the ongoing tightness prompted domestic Indian suppliers to raise prices this month.
Additionally, a majority of refiners around the world had to trim run rates since the second quarter of the year due to the demand destruction of refined products, mainly fuels, caused by the coronavirus pandemic.
While demand for fuels improved, it was still below 2019 levels and with new infection rates increasing in Europe, the U.S. and some Asian nations, there were concerns that fuel and base oil consumption would again decline in coming weeks. Jet fuel demand was particularly impacted by a significant decrease in passenger traffic and reduced flight schedules.
For the time being, however, Asian base oil suppliers were trying their best to meet the healthy demand levels, given that many buyers were eager to pad inventories on expectations that prices would continue to edge up. Base oil indications have increased steadily since September, with some numbers heard to have moved up by $10 to $20 per metric ton on an FOB Asia basis again this week.
A major Southeast producer also nominated an increase of $20/t for its Group II 150 neutral grade and $30/t for its 500N grade, effective Nov. 9.
While base oil and lubricant demand typically tends to decline in Asia during the last two months of the year as participants try to lower inventories to avoid tax implications, this year, consumption levels in most countries were considered fairly robust, although still below the best months in 2019. “Our demand is gradually recovering, though still under the levels of last year,” a supplier concurred, while others voiced similar opinions about a market recovery.
Not all countries were showing the same eagerness to secure imports, however. Buying interest from China appeared to have subsided due to seasonal patterns and an abundance of domestic supply. With the addition of Group II units to the local roster of plants over the last couple of years, China has slowly been able to decrease its dependence on imported base oils.
Additionally, it was heard that one of the Chinese Group II plants that had been shut down since earlier in the year, Sinopec Yanshan Petrochemical, would be restarted in December, although there was no producer confirmation about the plant’s status.
There continued to be vigorous demand for heavy-vis Group I cuts and bright stock, which were said to be in deficit within China. Offers have moved up as there was hefty competition for these grades from other markets such as Southeast Asia and India.
Thailand has been a major player in this segment of the market in recent weeks as Thai producers have increased production rates, and several cargoes have appeared on the scene.
Group I supplies were also more limited in Asia due to the turnaround at a Japanese plant, which was expected to come back on stream in mid-November, following a two-month routine turnaround. Additional details were not available from the producer at the time of writing.
Domestic prices for the fourth quarter in Japan have defied the current upward trend in the rest of the region, and surprisingly decreased from the third quarter. This is because these prices are calculated based on a “cocktail” of different values, and crude oil levels were lagging those seen later in the year. Eneos, the major producer who issues the price estimations, lowered the fourth quarter price of 150N by 21.20 Japanese yen per liter to 56.16 yen/liter, according to market sources. Eneos was expected to lift the first quarter 2021 price by approximately 15 yen/liter. South Korean suppliers selling to Japan have followed Eneos’ movements.
As far as Group II cuts were concerned, availability from Taiwan and South Korea has improved, given that two producers that had shut down their plants for maintenance have restarted and were now running at higher rates. The suppliers were mostly focusing on contractual obligations and were able to offer a number of cargoes for spot business.
Demand for Group III cuts has also been healthy as consumers have started to use more of these cuts in their formulations whenever possible, given that prices of other base stock categories have moved closer and Group III grades have also been more readily available. A majority of these grades were arriving in India, for instance, from the Middle East, while South Korean barrels were also being offered throughout the region.
Once again, spot base oil prices were assessed as stable to firm, mirroring the situation seen over the last several weeks given continuing product tightness and heightened buying interest. The numbers also followed the movement of published prices widely regarded as benchmarks for the region.
Ex-tank assessments reflected the increases from a key Southeast supplier as of Nov. 9. The Group I solvent neutral 150 grade was assessed up by $20/t at $580/t-$620/t. The SN500 also moved up by $20/t to $710/t-$750/t and bright stock similarly edged up by $20/t to $770/t-$810/t, all ex-tank Singapore this week.
The Group II 150 neutral was assessed higher by $20/t at $590/t-$630/t, and the 500N also edged up by $20/t to $730/t-$760/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 inched up by $20/t to $500/t-$540/t, and the SN500 increased by $20/t to $640/t-$680/t. Bright stock was higher by $20/t at $710/t-750/t, FOB Asia.
Group II 150N was adjusted up by $10/t at $540/t-$580/t FOB Asia, while the 500N and 600N cuts moved up by $10-20/t to $640/t-$680/t, FOB Asia.
In the Group III segment, the 4 centiStoke and 6 cSt were assessed higher by $20/t at $750-$790/t and $770/t-$810/t, respectively. The 8 cSt grade was also up by $20/t at $700-740/t, FOB Asia for fully approved product.
Upstream, crude oil futures received a lift from hopes about the impending development of a coronavirus vaccine, and OPEC’s discussion about the possibility of extending output cuts by three to six months into next year. Prices were partly weighed down by prospects of reduced demand due to the growing number of coronavirus cases and the implementation of restrictions in many countries.
On Thursday, Nov. 12, Brent January futures traded at $43.79 per barrel on the London-based ICE Futures Europe exchange, from $40.79/bbl on Nov. 5.
Dubai futures strengthened on the back of increased demand in Asia, which boosted overall market sentiment, S&P Global Platts reported.
Dubai front month crude oil (Platts) financial futures settled at $43.41/bbl on the CME on Nov. 11, from $41.05/bbl on Nov. 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.