Spot prices in Asia continued to be exposed to upward pressure, but the speed and size of the increases seemed to have been tempered by softer crude oil and feedstock prices and buyers’ resistance to the steeper offers. Local holidays celebrated in a few countries during the week also dampened buying interest.
Consumers continued to face challenges in locating sizeable spot cargoes within the region. Some buyers were anxious to secure product and were therefore willing to accept higher offer levels, but many appeared to be digging in their heels and refused to pay higher prices this week. This may be just a respite in the dramatic price race seen over recent weeks as buyers try to catch their breath, or it may signal a turning point in market fundamentals. As refiners have started to increase run rates and a number of plants were anticipated to be restarted following turnarounds this month, spot availability was expected to improve.
Spot prices rose persistently over the last several weeks, and end-users commented that they would likely manufacture finished products at a loss because it was difficult to pass the higher raw material values onto their downstream products. This seemed to be particularly challenging for smaller manufacturers that compete with larger producers that run integrated operations. A few opted for trimming output and utilizing existing inventories instead of chasing fresh base oil cargoes. There have been supply disruptions of some raw materials caused by the COVID-19 pandemic and other factors such as severe weather and transportation hiccups, sources noted.
Recent and ongoing plant turnarounds, together with steady demand and reduced run rates at refineries, have resulted in extremely tight supply conditions, and participants did not expect the situation to improve until May at the earliest. Similar conditions were seen in Europe and the United States, limiting import opportunities.
The U.S. typically supplies large quantities of API Group II base oils to India; however, the spot volumes moving from that origin have declined, with only two light-viscosity cargoes heard to be lined up for India in April so far. Indian buyers have also been procuring Group II base oils from Taiwan and South Korea, but South Korean spot availability was restricted by ongoing turnarounds.
The only Taiwanese Group II producer, Formosa Petrochemical, was heard to have raised its domestic list prices for a third time this month, reflecting the upward trend observed in the region.
Two large South Korean facilities began turnarounds in March and were heard to be still down. However, SK’s plant in Ulsan was expected to complete maintenance work in mid-April, while GS Caltex’s plant in Yeosu was also anticipated to restart in the second half of April.
Extended Group I plant turnarounds in Singapore, Japan and India, a recent maintenance shutdown in Thailand and an unplanned outage in Japan in late March led to more limited availability of spot cargoes within that segment, according to sources. A fire that broke out at the Eneos refinery in Wakayama, Japan, on March 29 forced the producer to stop operations at its Group I plant. No further updates were available at the time of writing.
The heavy-viscosity grades and bright stock were particularly elusive, with Chinese buyers heard to have increased offer levels to secure cargoes offered by Southeast Asian producers in recent weeks. The same buyers retreated from the trading scene this week as supply levels have improved in China thanks to recent purchases and domestic production. Indian buyers also appeared more reticent about raising their bids to secure product.
Spot prices in Asia in general were stable to firm, with some of the heavy grades and Group III cuts experiencing the most increases as supply was the tightest and there was renewed buying interest for these cuts. However, the limited spot supply resulted in muffled trading. The ranges portrayed below were revised to reflect discussions and published prices widely regarded as benchmarks for the region.
Ex-tank Singapore prices were fairly stable this week, although bright stock showed a steep increase. The Group I solvent neutral 150 grade was assessed at $940/t-$970/t. The SN500 was steady at $1,480-$1,520/t. Bright stock jumped by $60/t to $1,740/t-$1,780/t, all ex-tank Singapore.
The Group II 150 neutral was holding at $1,010/t-$1,050/t, and the 500N was up by $20/t at $1,390/t-$1,430/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $830/t-$870/t, and the SN500 was steady at $1,450/t-$1,490/t. Bright stock moved up by $30/t to $1,670/t-1,710/t, FOB Asia.
Group II 150N was holding at $820/t-$860/t FOB Asia, while the 500N and 600N cuts edged up by $10/t to $1,190/t-$1,230/t, FOB Asia.
In the Group III segment, the 4 centiStoke was assessed up by $40/t at $1,200-$1,240/t and the 6 cSt was also adjusted up by $40/t to $1,220/t-$1,260/t. The 8 cSt grade also registered an increase of $40/t to $1,150-1,190/t, FOB Asia for fully approved product.
Upstream, crude oil futures slipped on the back of the recent decision by OPEC+ members to gradually boost crude oil supply from May to July, and on traders’ concerns that oil demand would not recover as fast as expected given renewed global COVID-19 infection spikes.
On Thursday, April 8, Brent June futures were trading at $62.74 per barrel, from $63.67/bbl for May futures on April 1 on the London-based ICE Futures Europe exchange.
Dubai front month crude oil (Platts) financial futures settled at $60.74/bbl on the CME on April 7, from $60.56/bbl on March 31 (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.