The market tightness continued to be the predominant factor in determining price direction in Asia, with numbers edging up as a number of base oil grades remained difficult to source.
Despite the fact that Chinese buyers were not featuring as prominently as in the past in terms of base oil imports, a shortage of the heavy-viscosity grades and bright stock at home forced players to look for cargoes elsewhere. As a result, Chinese consumers had to compete with other buyers in Asia for barrels of the same origin, driving price indications up.
Additionally, the ongoing cutbacks in operating rates at several refineries resulted in reduced supplies within the region, while spot availability in other regions was also strained. Sources said that Europe and the Middle East were showing snug supplies and rising values too, while in the United States, paraffinic and naphthenic producers were in the process of implementing fairly hefty price increases. Import options were therefore limited, and were placing pressure on origins such as Southeast Asia.
Producers in Southeast Asia typically supply end-users in close proximity and China. However, given the global shortage of certain grades such as the Group I heavy-vis cuts, there has been increased interest in moving cargoes to other destinations, such as India and the Middle East, prompting competition among buyers and driving prices up.
It was heard that at least one Southeast Asian bright stock cargo had been secured by a Chinese buyer for shipment in January, while other consumers continued on the lookout for solvent neutral 500 and bright stock parcels. Shipments from Northeast Asia were expected to meet some of the heavy-vis requirements, but bright stock was more difficult to locate.
Recent and upcoming plant turnarounds in Japan, which also regularly ships product to China and other destinations in Asia, meant that there was less availability in the last quarter of the year and possibly in the first quarter, when at least one Japanese producer was heard to be taking its plant off-line for maintenance. Eneos was understood to be planning to shut down one of its two refineries in Mizushima, Japan, for an extended turnaround in mid February, although there was no producer confirmation.
One bright spot for Indian buyers appeared to be the reappearance of API Group I shipments from Iran. These shipments had been curtailed due to international sanctions on Iranian oil shipments. It was heard that these cargoes were offered at slightly lower levels than shipments from regional suppliers.
Production from Indian refiners was also expected to improve as domestic turnarounds have been completed. A turnaround at an Indian producer’s plant, which started last December, was expected to be completed this month, but another refiner was heard to be planning a turnaround in March. Nevertheless, Indian buyers continued to secure product from various origins, although the purchasing pace may have slowed somewhat because buyers appeared more reluctant to pay the lofty price levels, and were also finding it difficult to transfer the increases to downstream finished products segments, or absorb the extra costs.
Some attention was focused on a South Korean producer’s offer of various Group II grades last week, but there were expectations that more cargoes would also be moving from the U.S. in coming weeks. A large U.S. Group II producer was heard to have some spot availability for export, and there were also potential offers from Singapore and Taiwan. Supply from the Middle East moving to India was expected to be more limited in the short term as a producer was embarking on a turnaround, according to sources, although this could not be confirmed.
Asian base oil producers continued to feel the pressure from climbing feedstock and crude oil values. They were compelled to keep refineries running at reduced rates because of the slump in fuels and other refined products demand, with slim jet kerosene consumption in particular affecting certain operations.
Market participants also kept an eye on developments in China, as activity tends to slow down ahead of the Lunar New Year festival on Feb. 11-26. This year, celebrations and travel during the holiday will be restricted due to the pandemic. China has been one of the few countries showing economic growth over the last few months, as most other economies have contracted due to the effects of the coronavirus outbreak.
The Chinese economy grew 2.3% last year, fueled by manufacturing and exports, the country’s National Bureau of Statistics announced on Jan. 18. By contrast, the U.S., Japan and many nations in Europe are expected to report contractions as lockdowns and other restrictions continue. New virus outbreaks in China and government efforts to stamp them out were also expected to affect its economic performance in coming weeks. However, certain lubricant-related segments such as the automotive industry have shown a steady recovery since the first quarter of 2020.
There continued to be upward pressure on spot prices as supply in all base oil groups, including Group III, was deemed tight, with no easing in sight. However, it remained to be seen whether consumers would be willing to accept the higher indications, given looming uncertainties in some downstream segments. The ranges portrayed below have been revised to reflect current discussions and published prices widely regarded as benchmarks for the region.
Ex-tank Singapore prices were up on higher buy and sell indications. The Group I solvent neutral 150 grade was up by $10 per metric ton at $750/t-$790/t. The SN500 was up by $20/t to $950/t-$990/t and bright stock also moved up by $20/t to $1,030/t-$1,080/t, all ex-tank Singapore this week.
The Group II 150 neutral was assessed up by $10/t at $810/t-$850/t, and the 500N was adjusted up by $10/t to $940/t-$970/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed up by $10/t at $670/t-$700/t, and the SN500 was assessed up by $20/t at $880/t-$920/t. Bright stock was also higher by $20/t at $980/t-1,020/t, FOB Asia.
Group II 150N was up by $10/t at $690/t-$730/t FOB Asia, while the 500N and 600N cuts moved up by $20/t to $840/t-$880/t, FOB Asia.
In the Group III segment, the 4 centiStoke was assessed up by $20/t at $900-$940/t and the 6 cSt was also up by $20/t at $920/t-$960/t. The 8 cSt grade was adjusted up by $20/t as well to $850-890/t, FOB Asia for fully approved product.
Upstream, crude oil prices slipped during mid-morning trade in Asia on Thursday as data released by the American Petroleum Institute revealed an unexpected build in U.S. crude inventories. However, numbers also received support on optimistic expectations of further stimulus and improved pandemic management following U.S. President Joe Biden’s inauguration.
On Thursday, January 21, Brent March futures were trading at $55.68 per barrel, from $55.98/bbl on Jan. 14 on the London-based ICE Futures Europe exchange.
Dubai front month crude oil (Platts) financial futures settled at $55.48/bbl on the CME on Jan. 20, from $55.27/bbl on Jan. 13 (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.