Within Asia, some of the more traditional trade patterns have experienced a reshuffling since the start of the pandemic, with buyers in China, for example, having to compete with consumers in Southeast Asia for cargoes offered by producers in that area. Northeast Asian suppliers also increased the volumes shipped to Southeast Asian buyers.

A number of cargoes of Southeast Asian origin were vigilantly kept by buyers there because prices were more competitive than those in other regions due to the proximity of the plants, and also because there was a need to cover production outages in Indonesia, Thailand and Singapore. A limited number of Southeast Asia parcels were also expected to move to the Middle East as values there were attractive, although buyers have grown more resistant to higher figures.

India became one of the dominant players early in the year, when demand for lubricants in that country had recovered and the population’s mobility had increased after the first wave of the coronavirus pandemic. Indian buyers also participated in tenders offered by Southeast Asian suppliers and sought cargoes wherever they became available. South Korean shipments to India also increased.

However, with a new coronavirus wave raging in the country, Indian buying interest was heard to have declined, as several areas were under lockdown and the population’s movements have been restricted. Car sales have slumped and fuel demand has taken a hit as well. The vaccination campaign in India has been progressing more slowly than anticipated, and this week, it suffered a setback due to Cyclone Tauktae, which made landfall in the state of Gujarat, forcing massive evacuations and vaccination centers to close. All of these events have impacted base oil and lubricants demand in India, with buyers retreating from the trading scene and mostly trying to utilize existing stocks.

Chinese participants’ buying activity has also been more muted, especially as far as imports were concerned, as end-users tried to meet demand through domestic supplies. A number of Chinese base oil plants that had been shut down or running at reduced rates have ramped up output, although the heavy-viscosity grades were still scarce, with bright stock said to be particularly difficult to locate. Some relief has come from Taiwanese shipments, with volumes shipped to China since the start of the second quarter having seen a surge, compared to the previous quarter. Likewise, several South Korean parcels were heard booked for shipment to China this month and in June.

Consumers concurred that API Group I grades remained the tightest and most difficult to source, and prices have therefore skyrocketed since the beginning of the year. With fewer facilities producing Group I compared to a few years ago, and some of the Group I cuts being difficult to replace, prices have steadily increased to surpass values of high performance Group III cuts. Some blenders have started to use Group II and III grades in lieu of Group I cuts in applications where this was possible.

There were expectations that the Group I segment would remain tight in the short term. A couple of Group I plants in Japan remained off-line, while a unit in India was undergoing an extended shutdown and a facility in Singapore has been idle since June last year.

Eneos’ Group I plant in Wakayama, Japan, suffered a fire on March 29 and has been shut since then. Repairs at the refinery were expected to be completed by the end of the month, according to sources.

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, which started in early May.

The Group II segment has also been extremely tight, but the resumption of production at a couple of South Korean plants and increased output rates at other facilities in South Korea helped improve availability over the last couple of weeks.

Looking ahead, Taiwanese producer Formosa Petrochemical was heard to have slated a month-long turnaround at its Group II plant, starting in July. While some petrochemical plants were affected by rolling power outages in Taiwan this week, the Formosa plant in Mailiao was heard to have been largely unaffected by the blackouts.

Additional Group II production was also expected to come on stream in China during the third quarter.

Group III supply has also been strained given healthy demand and reduced availability during a large South Korean producer’s turnaround in April. Shipments from the Middle East had seen a slight decrease due to production issues and increased demand within the region.

Market players indicated that costs such as logistics and transportation had inched up as well in recent weeks. Participants have faced difficulties in securing space on vessels and certain packaging materials were scarce due to supply chain disruptions caused by the pandemic. The higher production costs and steeper base oil prices have prompted finished lubricant manufacturers to implement increases in their own downstream segments.

Spot base oil prices in Asia were largely stable, with a small upward revision noted for one of the heavier grades. The ranges portrayed below have been revised to reflect discussions, deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were steady this week, with the exception of bright stock. The Group I solvent neutral 150 grade was holding at $970/t-$1,000/t. The SN500 was also unchanged at $1,570-$1,610/t. Bright stock inched up by $10/t to $1,880/t-$1,920/t, all ex-tank Singapore.

The Group II 150 neutral was unchanged at $1,050/t-$1,090/t, and the 500N was also holding at $1,480/t-$1,520/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $840/t-$880/t, and the SN500 was assessed at $1,530/t-$1,570/t. Bright stock was hovering at $1,840/t-1,880/t, FOB Asia.

Group II 150N was holding at $840/t-$880/t FOB Asia, while the 500N and 600N cuts were steady at $1,290/t-$1,330/t, FOB Asia.

In the Group III segment, the 4 centiStoke was assessed at $1,280-$1,320/t and the 6 cSt was unchanged at $1,310/t-$1,350/t. The 8 cSt grade was steady at $1,230-1,270/t, FOB Asia for fully approved product.

Upstream, crude oil futures were trading lower on Thursday on weaker spot demand, an energy agency report showing growing inventories and a sell-off in equity markets in the U.S.

With a fifth round of nuclear negotiations between the U.S. and Iran to reinstate the Joint Comprehensive Plan of Action scheduled to begin next week, there were concerns that this could lead to Iran increasing oil production to pre-sanction levels of about 3.9 million barrels per day next year, analysts said.

On Thursday, May 20, Brent July futures were trading at $65.73 per barrel, from $67.68/bbl on May 13 on the London-based ICE Futures Europe exchange.

Dubai front month crude oil (Platts) financial futures settled at $64.36/bbl on the CME on May 19, from $66.78/bbl on May 12 (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.