Last week, a Southeast Asian producer offered two 4,000-metric-ton cargoes of Group I grades for February loading through a tender, which included bright stock and solvent neutral 500. The bright stock cargo was reported to have fetched a price more than $100 per metric ton above previous transactions, at around $1,200/t FOB. The cargo was heard to have been sold for shipment to China. Transportation from the base oil plant to a Chinese port was anticipated to be pricey, perhaps resulting in a CFR price in the high $1,200s-$1,300/t. This jump reflected the lengths that some buyers were willing to go in order to secure Group I volumes. The combined SN500 and bright stock cargo was heard to have been sold to Singapore, but price details were not forthcoming, although it was said to have been substantially higher than previous deals.

There has also been keen buying interest for small cargoes of Thai origin. Even though prices in Southeast Asia have risen to levels well above those in other regions such as Europe, there is not much availability of Group I grades anywhere else, and therefore import options have been limited. Sources said that blenders have been trying to change formulations for years in order to reduce their dependence on Group I base stocks, but there are still many applications that require these cuts.

Activity in many countries in Asia was expected to slow down this week with the start of the Lunar New Year celebrations on February 11-12, Seollal in South Korea on Feb. 11-13, and National Foundation Day in Japan on Feb. 11.

One distinct characteristic this year was that the Chinese government discouraged the movement of people during the holiday due to the risk of the spread of the coronavirus. The government has imposed restrictions like requiring a COVID test and quarantine upon return of the travelers. It is customary for families to go back to their home towns for the celebrations, and hundreds of millions of Chinese people would be on the road and on public transportation before and after the holidays, while manufacturing plants also reduce operating rates or shut down temporarily. This year, however, many plants were expected to continue running at normal rates and the number of travellers was anticipated to be much lower. The Chinese Ministry of Transport estimated that 1.15 billion trips would be made during the 40-day Lunar New Year travel period this year, 61% less than in 2019 and 22% less than last year, CNN.com reported.

Despite the holidays, demand for base oils has been fairly healthy throughout the region, with not only China, but also India attracting many cargoes from South Korea, Taiwan, the United States, Southeast Asia and the Middle East. India was still on the lookout for Group I, Group II and Group III grades, but bids were lower than those for the Southeast Asian cargoes offered last week, and therefore Indian buyers were not able to secure these cuts.

There were rumblings that a large cargo of light grades had been fixed to move from Spain to India this month. Taiwanese supplies were also expected to be making their way to India and Southeast Asia during February, but an increase in Taiwanese shipments to China may put a damper on movements to other destinations in coming weeks. Increased availability from domestic producers in India allowed buyers to source material locally, but domestic prices have also climbed.

Producers reported strong interest in term shipments, as buyers were eager to secure volumes under contract and avoid uncertainties such as product shortages and rising prices. In many instances, spot prices for the light grades were higher than those for term supplies. This trend contributed to the tightening of availability, particularly ahead of a number of turnarounds in the region.

A major Singapore refiner was expected to implement increases as of Feb. 8. Per this initiative, its Group I SN150 would be raised by $20/t and its SN500 and bright stock would increase by $50/t. The producer’s Group II 150N would move up by $30/t and its 500N by $50/t.

Spot prices in Asia experienced strong upswings this week, with most prices seeing adjustments on the back of strained spot supply and reduced inventories. The ranges portrayed below have been revised to also reflect current discussions and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were adjusted up on higher bids and offers, recent transactions and this week’s adjustments by a regional producer. The Group I solvent neutral 150 grade was up by $20 per metric ton at $800/t-$840/t. The SN500 jumped by $80/t to $1,110/t-$1,150/t and bright stock by $80/t as well to $1,200/t-$1,240/t, all ex-tank Singapore this week.

The Group II 150 neutral was up by $30/t at $870/t-$910/t, and the 500N was adjusted up by $50/t to $1,080/t-$1,110/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed up by $10-20/t at $720/t-$760/t, and the SN500 jumped by $80/t to $1,080/t-$1,120/t. Bright stock surged by $80/t to $1,160/t-1,200/t, FOB Asia.

Group II 150N was higher by $10/t at $720/t-$760/t FOB Asia, while the 500N and 600N cuts moved up by $20/t to $920/t-$960/t, FOB Asia.

In the Group III segment, the 4 centiStoke was assessed up by $20/t at $960-$1,000/t and the 6 cSt was also up by $20/t at $980/t-$1,020/t. The 8 cSt grade edged up by $20/t as well to $910-950/t, FOB Asia for fully approved product.

Upstream, crude oil futures climbed on Wednesday following a report by the Energy Information Administration of a larger-than-expected U.S. crude oil inventory draw for the week to Feb. 5. However, weak performance of gasoline and other fuels made prices retreat on Thursday, as this signaled that the pandemic was still dampening demand.

On Thursday, February 11, Brent April futures were trading at $61.17 per barrel, from $58.73/bbl on Feb. 4 on the London-based ICE Futures Europe exchange.

Dubai front month crude oil (Platts) financial futures settled at $60.37/bbl on the CME on Feb. 10, from $57.66/bbl on Feb. 3 (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.