Base oil prices in the Asian market remained relatively steady to higher, driven by robust crude oil and feedstock costs in the midst of a tightening supply and demand equilibrium. This scenario can be partially attributed to increased purchasing interest from select consumers seeking to replenish their inventories. Simultaneously, several refineries opted to curtail their base oil production in favor of prioritizing fuel production due to limited supplies and attractive profit margins. Notably, API Group III grades appeared to be in surplus and thus susceptible to downward price pressures.
In the same vein, gas oil supplies have dwindled, causing prices to surge and compete with the values of Group I and Group II base oils. This dynamic has prompted refiners to divert more feedstocks into the production of distillates. Furthermore, the possibility of both planned and unplanned shutdowns of base oil units in the region could exacerbate the already tight base oil availability.
Base Oil Trends In South Korea
Reports emerged regarding a fire incident at the Hyundai Oilbank refinery located in Daesan, South Korea, on August 25. This unfortunate event significantly impacted the availability of essential feedstocks required for the operation of the associated Hyundai and Shell Base Oil Co. base oil plant. Consequently, it was anticipated that the base oils unit would remain offline for a minimum of one week as the company embarked on the process of procuring imported feedstocks to restore operations. Base oil production was slated to recommence on September 1. Due to the outage, spot shipments were constrained, but the company was committed to meeting its term obligations.
Base Oil Trends In Taiwan
In the broader context of the Asian market, Group II base oil spot availability had already been dwindling. This trend was exacerbated by the forthcoming two-month shutdown planned by the sole Taiwanese producer, Formosa Petrochemical, at its Mailiao plant in October. To mitigate potential supply disruptions, the producer had been building up its inventories to fulfill term requirements during the downtime. However, this resulted in limited spot sales and reduced shipments to China. Taiwan is a significant exporter of Group II base oils, often catering to the Indian market as well.
Base Oil Trends In Japan
In Japan, a minor fire incident occurred when lightning struck a storage tank at the Eneos Mizushima-B refinery in Kurashiki on August 23. Fortunately, the rapid response from the local authorities and refinery personnel allowed them to swiftly contain the fire, averting any injuries or disruptions in production, as reported by local media outlets. Meanwhile, Eneos was gearing up to initiate an extensive turnaround for its Mizushima-A Group I plant, commencing this week and slated to last for a duration of three months.
Adding to their strategic developments, Eneos had set plans in motion to decommission its Wakayama refinery, known for its production of Group I base oils, with the closure anticipated to take place by October of the current year. This decision followed the permanent closure of the company’s Negishi CDU 1 and base oils plant in October of the preceding year. Eneos attributed the Wakayama refinery’s closure to multiple factors, including a diminishing domestic demand for refined products, influenced by factors such as declining population numbers, efforts toward decarbonization, and the growing popularity of electric vehicles, as articulated in a company statement.
Furthermore, Eneos was poised to repurpose the Wakayama site for the exploration and development of alternative energy sources, such as solar or biomass, aligning with their commitment to sustainable energy initiatives.
Base Oil Trends In India
In the Indian market, Bharat Petroleum had reportedly finalized plans for a refinery turnaround in Mumbai, set to commence in September. This scheduled maintenance would entail a partial shutdown of the base oils plant, impacting Group II production.
These supply disruptions, coupled with a surge in demand as buyers who had postponed their purchases as long as possible began reentering the trading arena, have resulted in a tightening supply and demand dynamic. In response, suppliers have adjusted their offers, and despite initial resistance from buyers, some of these increases have been successfully implemented.
Furthermore, there has been a growing appetite for Group I cargoes from Southeast Asian markets. Reports indicate that most sellers are approaching a near-sold-out position for September, with particular enthusiasm surrounding Bright stock due to limited product availability.
Indian buyers remained cautious, refraining from substantial base oil purchases as it was still early to gauge whether lubricant demand would significantly pick up following the monsoon season, which typically extends until September. Historically, demand tends to surge ahead of the Diwali festival in mid-November, prompting many manufacturers to bolster their inventories in anticipation of heightened consumption of finished products during preceding months.
Base Oil Trends In China
In China, Hongrun Petrochemical successfully initiated operations at its newly established Group III plant in Shandong during the current month. Simultaneously, in India, the commissioning of a fresh Group II and Group III base oils unit was on the horizon, with a targeted start-up scheduled for either September or October. This development might influence both countries to reconsider their reliance on imports of Group III base oils from South Korea and the Middle East. However, the actual impact of this new production capacity remained uncertain and awaited observation.
The Chinese demand for imported base oils had been relatively subdued due to concerns surrounding lubricant demand in the upcoming months, primarily driven by a slowing economy. Domestic supplies were deemed sufficient to meet existing demand, and importers exercised caution. While the majority of base oil offers had experienced upward movements, there was potential for prices to soften in the weeks ahead should regional supply become more abundant.
Overall, base oil spot prices exhibited a mixed pattern across Asia for the current week. Some grades recorded upward movements, while others remained stable or experienced slight declines. The price ranges provided below encompass discussions, bids, offers, recent deals, and widely recognized published prices serving as benchmarks for the region.
Base Oil price In Asia
Ex-tank prices in Singapore exhibited mostly stable trends, with select grades experiencing slight increases on a week-to-week basis. The Group I solvent neutral 150 grade remained unchanged within the range of $800/t to $830/t, while SN500 held steady at $920/t to $960/t. Bright stock maintained its position in the price bracket of $1,070/t to $1,110/t, all on an ex-tank basis in Singapore.
Conversely, prices for Group II 150 neutral saw an uptick of $10/t, reaching $930/t to $970/t, driven by tightening supply dynamics. Similarly, the 500N category also edged up by $10/t to a range of $990/t to $1,030/t, ex-tank in Singapore.
Shifting focus to an FOB Asia perspective, Group I SN150 prices remained stable at $670/t to $710/t, while SN500 witnessed a notable increase of $30/t, reaching $790/t to $830/t. Bright stock prices experienced a moderate rise of $20/t, landing in the range of $860/t to $900/t, all on an FOB Asia basis.
In the Group II category, the 150N grade was assessed with a $10/t increase at $800/t to $840/t, FOB Asia. Similarly, both the 500N and 600N cuts inched up by $10/t, with prices ranging from $850/t to $890/t, FOB Asia.
However, within the Group III segment, prices faced a decline due to abundant supplies and heightened competition among suppliers. The 4 cSt grade witnessed a decrease of $20/t, settling in the range of $1,390/t to $1,420/t, while the 6 cSt grade also dipped by $20/t, landing at $1,350/t to $1,390/t. In contrast, the 8 cSt grade remained unchanged, maintaining a price range of $1,070/t to $1,110/t, albeit with limited market activity. All price indications pertain to FOB Asia for fully approved products.
|SN 150||SN 500||Base Stocks||N 150||N 500|