Blenders in several countries in Asia and the Middle East also said that the COVID-19 pandemic had a lasting effect on business – despite the vaccination campaigns going on in many countries. They explained that numerous smaller companies had been forced to either stop manufacturing temporarily or close their doors as production costs continued to grow, while values in downstream markets failed to keep pace with these increases.

So far, however, India has remained an ebullient market, with demand for base oils not slowing down and buyers still on the lookout for the hard-to-get heavy viscosity oils. Base oil demand has not been affected by the pandemic, although logistics have been complicated by it, sources explained.

The problem, according to sources, is that Indian prices were not as high as those in other markets, so the country was not attracting as many cargoes.

A supplier of Middle East product noted that values have climbed so much in other regions, such as the United States, Europe and South America, that most shipments have been enticed to move to these destinations.

Chinese buyers had also been avid players in the business of trying to attract more cargoes from Southeast Asia onto their shores, as domestic supply of certain grades such as the heavy-viscosity cuts was not sufficient to meet demand. Players had upped their bids and been able to secure several parcels about a month ago, but imports, together with local supply, were currently able to meet demand levels, so the participation of Chinese importers has been less dynamic. There have also been more South Korean and Taiwanese API Group II cargoes moving to China in recent weeks.

Similarly, Southeast Asian buyers appeared less eager to secure product at all costs and have shown more restraint in terms of bid levels and how high they were willing to go to obtain a cargo. They showed interest in a tender held by a Southeast Asia producer of Group I heavy-vis grades and bright stock, but values did not climb as quickly as in March. Another producer was heard to be getting ready to offer some Group I cargoes in early May.

Aside from the effects of the pandemic and the product tightness, suppliers and consumers said that they had been dealing with a number of logistical problems.

One of them had been connected to the recent incident of a vessel running aground on the Suez Canal, which resulted in delayed shipments of base oils and rising costs as vessels took longer to complete a voyage.

Another problem was finding enough container vessels for flexibag shipments to cover certain routes. Many vessels carried products from China to the U.S., for example, but there were not as many goods moving from the U.S. to China, so the containers were stuck there, waiting to be filled, according to sources.

Meanwhile, in terms of production, ongoing turnarounds at Group II and Group III plants in South Korea have resulted in strained supply of these cuts.

Two large South Korean facilities began turnarounds in March and were expected to be restarted in the coming days. SK’s plant in Ulsan was expected to have completed maintenance work this week, while GS Caltex’s plant in Yeosu was also anticipated to restart in the next few days. No confirmation was available at the time of writing.

The U.S. normally supplies large quantities of Group II base oils to India; however, spot availability in the U.S. was negligible, with only two light-viscosity cargoes heard to have arrived in India in April, and a couple more on the water. Indian buyers have also been procuring Group II base oils from Taiwan and South Korea. South Korean spot availability has been restricted by the turnarounds, but other producers have offered cargoes in recent weeks and supply should increase once the two plants are running well.

Group III spot supplies from the Middle East have also been limited, with producers fulfilling contractual commitments, but being able to offer very little spot supply.

Similarly, there was a shortage of Group I supply due to production issues in Iran, a key source of Group I base stocks.

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.

Japanese producer ENEOS was forced to idle its Group I base oil production following a fire at its Wakayama refinery on March 29. Reports circulated that ExxonMobil, who sources product at the ENEOS refinery to meet contractual agreements and downstream operations, had declared force majeure on Group I supplies in Asia Pacific as its own facility in Singapore has also been down since June 2020. The producer did not confirm the force majeure declaration.

Despite all of these base oil production outages, participants remained optimistic that supply would start to improve in the next few weeks as Asian plants restart production, and refineries might increase run rates. U.S. producers were also expected to have more export availability as facilities have restarted, following disruptions caused by a winter storm.

Spot prices in Asia were therefore moving up less sharply than in previous weeks, with small upward adjustments affecting the tighter grades. Bright stock appeared to be the most difficult grade to locate and prices climbed again this week. Business was still subdued due to the lack of spot supply. The ranges portrayed below have been revised to reflect discussions and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were steady to slightly higher this week. The Group I solvent neutral 150 grade was assessed up by $10/t at $970/t-$1,000/t. The SN500 was also up by $10/t at $1,510-$1,550/t. Bright stock was adjusted up by $10/t as well to $1,770/t-$1,810/t, all ex-tank Singapore.

The Group II 150 neutral remained unchanged at $1,020/t-$1,060/t, and the 500N was up by $10/t at $1,420/t-$1,460/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $830/t-$870/t, and the SN500 was holding at $1,450/t-$1,490/t. Bright stock edged up by $20/t to $1,700/t-1,740/t, FOB Asia.

Group II 150N was steady at $830/t-$870/t FOB Asia, while the 500N and 600N cuts moved up by $10/t to $1,210/t-$1,250/t, FOB Asia.

In the Group III segment, the 4 centiStoke was assessed up by $10/t at $1,220-$1,260/t and the 6 cSt was adjusted up by $20/t to $1,250/t-$1,290/t. The 8 cSt grade moved up by $10/t to $1,170-1,210/t, FOB Asia for fully approved product.

Upstream, crude oil futures traded lower for a third day on Thursday due to a surprise build in U.S. crude inventories and a resurgence of COVID-19 infections in India and Japan, which fanned concerns about a potential decrease in oil and fuels demand.

On Thursday, April 22, Brent June futures were trading at $65.08 per barrel, from $66.39/bbl on April 15 on the London-based ICE Futures Europe exchange.

Dubai front month crude oil (Platts) financial futures settled at $62.47/bbl on the CME on April 21, from $64.02/bbl on April 14 (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.