Market activity was dynamic in most markets in Asia, but the conclusion of transactions was hampered by a lack of availability and a certain degree of resistance to rising offers. There were also concerns that the wave of coronavirus infections in the key market of India would impact demand in coming weeks, although some participants said that given the limited supply, a drop in demand might not have an immediate negative effect and would help ease some of the current tightness.
Despite the current setbacks affecting India, demand continued to be described as steady, with several cargoes moving there from South Korea, Taiwan, Singapore, Southeast Asia and the United States. A 7,000-metric-ton parcel was heard to have loaded in South Korea for shipment to India in mid-April, among other shipments, and another large cargo from the same origin was expected to move there in early May.
At least two United States light-viscosity base oil cargoes were on the water for late April and May arrival in India. An extremely tight supply and demand scenario in the U.S. meant that producers were forced to focus on domestic contractual business and had fewer barrels to offer for spot shipment to Asia. A vast majority of U.S. producers joined the fourth round of posted price increases since the beginning of the year, with hikes between 15 and 40 cents per gallon going into effect during the week.
A number of Asian plants have undergone or were in the process of completing turnarounds, but once these plants have been restarted and operating rates were ramped up, buyers expected improved supply conditions.
The base oil plant of major API Group I producer Eneos in Wakayama, Japan, remained shut down following a fire 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.
According to reports, the ExxonMobil Group I plant in Singapore, which was taken off-line in June last year, remained shut down, and no restart date had been announced.
Another Eneos Group I plant in Mizushima, Japan, remained off-line for an extended turnaround which started in mid-February and was not expected to be completed until mid June. A third Eneos facility in Kainan was scheduled for a turnaround starting in early May.
Two major producers in South Korea, SK Lubricants and GS Caltex, were expected to restart their plants by the end of the month after completing maintenance programs since mid-March.
In India, a producer has embarked on an extended turnaround while the associated refinery completes an upgrade, according to sources.
Looking ahead, Taiwanese producer Formosa Petrochemical was heard to have slated a month-long turnaround starting in July.
With a majority of production outages occurring in Northeast Asia, Southeast Asian base oil supply had become the focus of attention for many players in the region. Several cargoes moved from Thailand and Indonesia to various locations such as China, Singapore, and other destinations within Southeast Asia in recent months.
In May, however, it appears that some cargoes may be moving from Northeast Asia to Southeast Asia instead, with at least two South Korean parcels expected to load for Thailand and Indonesia in May.
Asian Group I supplies were also expected to make their way to the Middle East, as some opportunities seemed to have opened up for this type of exchange and fill the gap presented by an absence of European cargoes. In fact, while a couple of Thai tenders involving Group I grades had attracted fervent bids from Southeast Asian, Indian and Chinese buyers in March, the competition now seems to be between Southeast Asian and Middle East players.
China typically attracts large amounts of imports from within the region as well, particularly of heavy-vis grades given that domestic production is not deemed sufficient to cover demand. However, there have been fewer spot transactions and bids noted over the last month. A number of term cargoes moved from Taiwan and South Korea in April and additional ones were anticipated to arrive in May. Demand in China also typically starts to decline next month, following an active spring production season.
Many blenders in Asia were facing the difficult decision of having to cut back manufacturing rates as they were unable to offset the rise in raw material costs with higher sales prices of finished products. Some have opted for slowing production, while others shut down for brief periods of time. With lubricant consumption prospects in the region becoming uncertain, particularly in India due to the pandemic flare-up and localized shutdowns, finished product manufacturers have adopted a more cautious stance in terms of base oil purchases and prices. There were expectations that the lockups and growing infection rates may impact logistics and transportation as well.
Spot prices in Asia remained stable to firm. However, while values for the heavier grades continued to show upward adjustments, these revisions were more moderate than two months ago, when prices for some base oil grades had sometimes jumped by $100 per metric ton week on week. Business remained muted due to the dearth of spot cargoes. 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 holding at $970/t-$1,000/t. The SN500 was up by $20/t at $1,530-$1,570/t. Bright stock was also adjusted up by $20/t to $1,790/t-$1,830/t, all ex-tank Singapore.
The Group II 150 neutral was unchanged at $1,020/t-$1,060/t, and the 500N was up by $10/t at $1,430/t-$1,470/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $830/t-$870/t, and the SN500 moved up by $20/t to $1,470/t-$1,510/t. Bright stock also edged up by $20/t to $1,720/t-1,760/t, FOB Asia.
Group II 150N was steady at $830/t-$870/t FOB Asia, while the 500N and 600N cuts moved up by $20/t to $1,230/t-$1,270/t, FOB Asia.
In the Group III segment, the 4 centiStoke was assessed up by $20/t at $1,240-$1,280/t and the 6 cSt was adjusted up by $20/t to $1,270/t-$1,310/t. The 8 cSt grade moved up by $20/t to $1,190-1,230/t, FOB Asia for fully approved product.
Upstream, crude oil futures extended their earlier gains as concerns over oil demand destruction in India were offset by a more positive outlook in other parts of the world.
On Thursday, April 29, Brent June futures were trading at $68.01 per barrel, from $65.08/bbl on April 22 on the London-based ICE Futures Europe exchange.
Dubai front month crude oil (Platts) financial futures settled at $64.53/bbl on the CME on April 28, from $62.47/bbl on April 21 (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.