Reduced interest in major markets and abundant stockpiles persisted in driving down select base oil costs across Asia. Meanwhile, different categories have found stability amid a more equitable environment. The resurgence of production facilities post-turnarounds, coupled with robust operational levels at numerous refineries, has resulted in substantial inventories. Suppliers were actively devising strategies to secure orders, yet a seasonal deceleration combined with market ambiguities about second-half lubricant consumption, were tempering purchasing endeavors.
Base Oil Trends In Saudi Arabia
Thursday witnessed a slight uptick in crude oil prices, spurred by Saudi Arabia’s declaration of an extension for its voluntary crude production cut of one million barrels per day through September. This decision defied the International Energy Agency’s prognosis of heightened demand during the latter part of the year. The initial six months of the year had seen oil prices grappling with a mix of macroeconomic uncertainties, inflationary pressures, turbulence within the banking sector, and a gradual resurgence in Chinese demand, as reported by CNBC.com.
As of August 3, Brent crude October futures were recorded at $85.25 per barrel on the ICE Futures Europe exchange in London. This marked an increase from the $83.91 per barrel for September futures observed on July 27.
On August 2, Dubai front month crude oil (Platts) financial futures for September concluded at $83.15 per barrel on the Chicago Mercantile Exchange (CME). This figure showed a marginal rise compared to the $83.12 per barrel for August futures noted on July 26
Base oil purchasers exhibited a preference for acquiring smaller quantities, aiming to mitigate potential price volatility. Nevertheless, a portion of consumers reentered the market, initiating orders in response to the upward movement of crude oil and feedstock prices. These circumstances have the potential to drive future base oil price hikes, prompting some buyers to strive for pre-emptive procurement. Conversely, a subset of buyers chose a cautious approach, opting to observe the landscape as ample availability persisted in the API Group I and Group III categories. This abundance of options negated any urgency to secure additional inventory.
Base Oil Trends In Southeast Asia
Throughout August, the majority of Group I grades originating from Southeast Asia found eager takers, setting the stage for discussions surrounding September volumes. Stability in prices was reported, stemming from a more balanced equilibrium between supply and demand. The diminished count of API Group I producers over recent years due to facility rationalization has allowed the existing suppliers to establish a robust and loyal clientele.
Base Oil Trends In South Korea
Anticipated supply constraints were on the horizon due to an unforeseen reduction in production output at a Group II base oil facility located in South Korea. The producing entity had dialed down its operational rates, attributing the decision to challenges in feedstock supply linked to ongoing maintenance activities within the affiliated refinery housing the base oils unit. This circumstance has constrained the producer’s ability to offer surplus availability, given that multiple transactions for August shipments had already been concluded.
Conversely, within the Group III sector, an expansion in availability seemed apparent, driven by ample supplies sourced from the Middle East and the recommencement of operations at a Group III unit in South Korea. Moreover, consumer behavior leaned towards the utilization of Group II cuts in lieu of Group III grades wherever feasible due to the cost advantage of Group II prices. This ongoing trend has resulted in tighter Group II supply dynamics, while Group III stocks have surged, prompting producers to contemplate potential production rate adjustments.
South Korean suppliers have solidified a range of shipments scheduled for August. A shipment of approximately 5,000 metric tons was earmarked for transit from Yeosu to Southeast Asia later in the month. Additionally, a consignment of 1,500 tons was poised for dispatch from Yeosu to Tanjung Priok, Indonesia, during the latter half of August. Another consignment, totaling 2,000 tons, was quoted for transport from Yeosu to Rugao, China, in the waning days of August. Meanwhile, discussions centered around a 1,200-ton parcel destined for shipment from Onsan to Indonesia, also slated for late August. Further deliberations included a potential 1,050-ton consignment from Onsan to Mumbai, India, by mid-August, while around 1,000 tons were under consideration for shipment from Onsan to Singapore within the initial week of August. Lastly, a 2,000-ton allocation was quoted for upliftment from Onsan to Merak, Indonesia, to conclude the month.
Base Oil Trends In China
Base oil demand within the pivotal Chinese market exhibited a subdued stance, a predictable pattern given the historical trend of waning lubricant consumption during the latter half of the year. Notable exceptions include a brief surge preceding the national Mid-Autumn Festival and National Day, spanning late September to early October. The nation’s extensive areas grappling with severe floods also contributed to activity disruptions.
Comparatively, the allure of imported base oils dwindled in contrast to earlier months, primarily due to ample domestic supply across most grades. Notably, bright stock seemed to be an exception, with importers and distributors prudently maintaining stable price levels for this category, given its typical shortfall. The imminent inauguration of a Group III plant in China this month further contributed to the wane in demand for Group III imports.
Base Oil Trends In India
Turning to another key market, India echoed a parallel sentiment of lackluster demand. This sentiment was rooted in the perception of abundant domestic supplies, coupled with the anticipation of multiple import consignments scheduled for arrival during the month. The monsoon rains, infamous for causing transportation and manufacturing hiccups, played a role in suppressing purchasing enthusiasm, further weakening lubricant consumption. A dichotomy emerged among buyers: some adopted a cautious stance, deferring acquisitions until demand and pricing trends gained clarity, while others ventured into the market, securing shipments in a bid to outmaneuver potential price hikes driven by the recent global upsurge in crude oil and fuel prices.
Looking ahead, apprehensions emerged regarding the potential tightening of Group II supplies within the Indian market, driven by the anticipated wane in regular shipments from suppliers based in the United States, South Korea, and Taiwan. Reports indicated that a subset of these suppliers had already depleted their stock, resulting in a deliberate reduction in offer volumes. This strategic maneuver was attributed to inventory accumulation preceding or subsequent to plant turnarounds, alongside an aspiration to secure more lucrative prices in alternate markets.
In contrast, the landscape for Group III supply presented a divergent narrative. Abundant availability was noted across various grades within Asia and sourced from the Middle East. This excess availability was juxtaposed with subdued demand originating from Europe and the U.S., culminating in a downward influence on pricing dynamics within the Indian market. During the current week, the pricing trajectory of most base oil grades in India underwent a decline of approximately $20 per metric ton, with the exception of Group II cuts.
Base Oil price In Asia
Throughout this week, the spot price evaluations in the Asian region displayed a consistent to slightly declining trend. Certain grades experienced a decline in response to adjustments made in buying and selling indicators. The price ranges provided below encompass conversations, bids, offers, as well as transactions and widely accepted published prices that serve as benchmarks for this geographic area.
Excluding storage costs, prices in Singapore remained relatively stable to a bit softer in comparison to the previous week. The Group I solvent neutral 150 category saw a decrease of $20/t, now ranging from $810/t to $840/t. Conversely, the SN500 grade remained firm within the range of $920/t to $960/t. Meanwhile, the bright stock category experienced a $20/t decrease, now priced between $1,080/t and $1,120/t, all within Singapore storage.
The Group II 150 neutral grade’s prices were assessed as steady, maintaining a range of $900/t to $940/t. Similarly, the 500N grade hovered within the range of $930/t to $970/t, both within Singapore storage.
Shifting to an FOB Asia basis, the Group I SN150 maintained its stability, priced between $680/t and $720/t. Likewise, the SN500 grade displayed no changes, holding steady within the range of $760/t to $800/t. The bright stock category’s prices lingered between $840/t and $880/t, all on an FOB Asia basis.
For Group II, the 150N grade remained unchanged, priced at $770/t to $810/t, FOB Asia. Similarly, the 500N and 600N cuts demonstrated stability, maintaining a range of $810/t to $850/t, FOB Asia.
Within the Group III sector, prices exhibited a softer trend due to increased availability and competitive pricing. The 4 centiStoke grade observed a decrease of $20/t, now valued between $1,450/t and $1,480/t. Likewise, the 6 cSt grade experienced a $20/t reduction, now ranging from $1,410/t to $1,450/t. Meanwhile, the 8 cSt grade retained its position within the range of $1,060/t to $1,100/t, FOB Asia, specifically for fully approved products.
|SN 150||SN 500||Base Stocks||N 150||N 500|