Weekly Asia Base Oil Report:  04 – 11  November 2023

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In recent months, several Asian countries exhibited diverse trends in their base oil demand. While some adhered to the typical pattern of declining demand towards the end of the year, others experienced an increase in consumption levels, which contributed to the current spot price indicators. Concurrently, lower crude oil and feedstock values alleviated concerns among market participants, mitigating the potential for upward pressure on base oil prices during a period when demand traditionally tapers off.

Crude oil futures saw a decline from their previous highs, which had surged following the Hamas attack on Israel on October 7. These futures dropped significantly from levels seen around $96 per barrel in late September.

However, the persisting concern remained that the conflict might extend to other Middle Eastern regions, with potential implications for crude oil prices. Anxieties grew as Iran-backed Houthi rebels in Yemen claimed responsibility for missile and drone attacks targeting a Red Sea shipping port in southern Israel.

Oil prices showed a slight increase in early trading on Thursday, driven by investor apprehensions that the Middle East conflict could disrupt oil supplies, potentially leading to shortages.

 decision-making process for refiners regarding the production of middle distillates, such as gasoil versus base oils, is heavily influenced by the fluctuations in crude oil and gasoil prices. These products share the same feedstock stream, and as gasoil margins appeared more attractive in recent months, base oil plant operating rates were adjusted accordingly. This adjustment played a significant role in affecting base oil supply levels in the Asian market, resulting in the tightening of specific grades and increased spot offers from most suppliers.

Recent permanent shutdowns of Group I plants have reduced the sources of API Group I base oils. The most recent decommissioning occurred at an Eneos plant in Japan in mid-October. Additionally, sustained domestic demand in Group I producer countries in Southeast Asia, such as Thailand and Indonesia, has left fewer cargoes available for export transactions. However, there has been some surplus availability of Group II grades, which were made available through tenders.

The ongoing turnaround at Formosa Petrochemical’s sole Taiwanese API Group II plant has contributed to the tightening of Group II grades. The producer has reportedly built inventories to meet most term requirements during the outage. Meanwhile, a Malaysian Group II and Group III producer is expected to accumulate inventories in preparation for an extended turnaround scheduled for January of the following year, reducing its spot availability.

In certain key markets, like China, demand has remained subdued. This follows a brief surge in activity before the National Day or Golden Week holidays in early October, during which millions of people traveled to reunite with their families. The government’s efforts to boost the economy led to increased manufacturing activity, leading to heightened demand for industrial, marine, and rail lubricants. However, other segments of the market continued to show lackluster performance.

Chinese demand for imported base oils has decreased as domestic supplies have proven to be sufficient to meet most product requirements. Locally-produced base oils, especially Group II light grades, have become more competitive, rendering imports less viable. However, there is an exception for Group I grades like bright stock, as China faces a deficit in the heavier grades and needs to import cargoes from Southeast Asia and other sources. Consequently, prices for these grades have steadily risen over the past two months.

Despite the opening of a new Group III plant in China and improvements in the specifications of locally-produced base oils, the country’s reliance on Group III imports has declined. Although a 3,000-ton cargo from Ulsan, South Korea, to Tianjin and a 10,000-ton shipment from Singapore to Taicang were reported, a 2,000-ton lot was also shipped from Shanghai to Singapore at the end of October.

India’s base oil demand has shown a distinct trend with a noticeable strengthening, and interest in importing base oils has surged. The robust economic growth of the country, coupled with the approach of Diwali, the Festival of Lights, celebrated for five days starting on November 12, has driven blenders to procure additional base oil shipments, as lubricant demand is expected to be robust. Notably, Diwali is also celebrated in Singapore and various other Southeast Asian countries.

Given the scarcity of Group I base oils in the region, buyers have been opting for Group II grades wherever applications permit. This choice has been driven by the relatively more abundant spot availability of Group II cuts, even though there exists a substantial price difference between the two categories. As a result, several base oil shipments were anticipated to be concluded for India from the Middle East and the United States this month. Furthermore, details emerged about a 10,000-ton cargo that was shipped from Port Arthur, U.S., to Mumbai in mid-September aboard the TRF Marquette.

Meanwhile, newly-imposed import restrictions have affected the typical flow of spot cargoes from the U.S. to neighboring Mexico. These restrictions may limit the volume of U.S. product moving to Mexico in the coming weeks, potentially resulting in more cargoes being diverted to alternative destinations, including India. The news of these Mexican legal hurdles reached Indian participants, who appeared to seize the opportunity to secure U.S. light grade cargoes at a discount.

In the context of Middle Eastern cargoes, an expected 2,000-ton parcel was set to be shipped from Ruwais, United Arab Emirates, to Jawaharlal Nehru Port Trust in early November. Additionally, discussions were underway for about 18,000 tons to be shipped from Yanbu and Jeddah to Mumbai in late November.

Anticipated South Korean shipments to Indian shores in the coming weeks included a range of cargoes. Approximately 8,000 to 9,000 tons were expected to be transported from Onsan to Mumbai at the end of November.

As arbitrage opportunities opened up in the Americas, South Korean cargoes found their way to distant destinations, notably the West Coast of South America. An expected 9,000-ton parcel was set to be shipped from South Korea to Ecuador and Peru this month. Additionally, a 4,500-ton parcel consisting of two distinct base oil grades was on the agenda for shipment from Onsan to Rio de Janeiro, Brazil, in early December. Moreover, a 5,000-ton base oil cargo was quoted for potential shipment from Daesan or Pyongtaek to destinations like Houston, U.S., or Port La Nouvelle, France, scheduled for January.

Looking at more regional routes, discussions mentioned a 3,000-ton lot expected to be lifted in Yeosu and bound for Manila, Philippines, at the end of November. Another shipment of 3,000 to 5,000 tons was likely to be dispatched from Yeosu to Hamriyah, U.A.E., in late November.

Base Oil price In Asia

Base oil spot price assessments in Asia remained steady to slightly firmer, with variations depending on factors affecting specific base oil segments. The price ranges outlined below reflect discussions, bids, offers, recent deals, and published prices that serve as benchmarks for the region.

Ex-tank Singapore prices showed stability to modest increases compared to the previous week. The Group I SN 150 grade increased by $10/t to a range of $840/t-$880/t, while the SN500 also rose by $10/t, now at $990/t-$1,020/t. Bright stock witnessed a $10/t increment, reaching $1,220/t-$1,260/t, all ex-tank Singapore.

Prices for the Group II 150 neutral remained at $1,010/t-$1,040/t, and the 500N stayed steady at $1,050/t-$1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 maintained its previous levels at $790/t-$830/t, while the SN500 continued to hover at $890/t-$920/t. Bright stock prices remained firm at $1,010/t-$1,050/t, FOB Asia, driven by limited availability.

Within the Group III segment, the prices for 4 centiStoke, 6 cSt, and 8 cSt showed minimal changes this week due to limited discussions. The 4 cSt was assessed at $1,290-$1,320/t, the 6 cSt at $1,260/t-$1,300/t, and the 8 cSt grade traded at $990-$1,030/t. These price indications are FOB Asia for fully approved products.

SN 150 SN 500 Base Stocks N 150 N 500
Singapore $840/t-$880/t $990/t-$1,020/t $1,220/t-$1,260/t $1,010/t-$1,040/t $1,050/t-$1,090/t
FOB Asia $790/t-$830/t $890–920/t $1,010/t-1,050/t $1,290/t-$1,320/t $1,260/t-$1,300/t
Price Per Ton Base Oil In Asia 04-11 November 2023
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