Divergent patterns emerged within the Asian base oils markets, unveiling a spectrum of price movements. Certain grades experienced a subtle uptick, others held their positions unflinchingly, while a subset witnessed a downward slide due to weakened underpinnings. The demand for base oils and lubricants remained lackluster in pivotal markets like China and India, exerting a downward pull on select grades, despite the resilient surge in crude oil and feedstock prices. Amidst this milieu, a handful of base oil varieties found themselves in tighter supply, fanning the flames of upward adjustments, while an alternate set of grades faced a decline in prices.
Market stakeholders remained vigilant, their gaze affixed to the oscillations of crude oil and feedstock valuations. These fluctuations not only reverberated through base oil pricing but also cast shadows on the refining landscape. As the pricing of diesel or gasoil surged, a preference among refiners surfaced to channel more feedstocks into the distillates stream, leading to a curtailed output of base oils and thereby constricting their availability. The repercussions of this dance between supply and demand dynamics loomed large over the impending months.
The arena of crude oil values bore witness to a remarkable leap compared to the bygone two months. The yardstick Brent crude commenced a dalliance with the $85 per barrel threshold in early August, having hovered around $75 per barrel in June’s dawn. This surge could be attributed to production cutbacks in pivotal oil-producing nations, a move that propelled the combined output of OPEC+ to its lowest ebb in almost a biennial span come July. This descent was catalyzed by Saudi Arabia’s unilateral reduction in output.
A recent upsurge in crude oil futures reverberated on the canvas of Wednesday, with Brent nearing its steepest zenith since January. This crescendo was propelled by a substantial reduction in U.S. fuel stockpiles, which found synchrony with the output cuts initiated by Saudi Arabia and Russia. These undertakings managed to cast a shadow over apprehensions about diminished demand from China, lending credence to the newfound zenith.
As of August 10th, the Brent crude October futures exhibited a trading value of $87.60 per barrel on the ICE Futures Europe exchange in London, marking an ascent from the $85.25/bbl registered on August 3rd.
Meanwhile, the Dubai front month crude oil (Platts) financial futures for September concluded at $87.68 per barrel on the CME platform on August 9th, showcasing an upward trajectory from the $83.15/bbl noted on August 2nd.
Base Oil Trends In China
In the realm of the crucial Chinese market, a series of underwhelming economic developments cast a pall over diverse sectors, including industrial output and construction activities. Despite the lapse of eight months since the relaxation of stringent pandemic-induced lockdowns that had previously immobilized extensive swaths of the nation, the Chinese economy – a global heavyweight as the second-largest only after the United States – has begun to experience a deceleration after an initial surge, as per observations by The New York Times. While numerous countries across the globe grappled with inflationary concerns, a converse dilemma emerged in China, with the nation grappling with deflationary tendencies. This trend was propelled by a noticeable hesitancy among the populace to expend their financial resources and businesses exhibiting reluctance in their expansion endeavors. CNN.com, in its recent coverage, detailed the phenomenon by reporting the decline of Chinese consumer prices, which had largely maintained a flat trajectory in the preceding months, marking the first instance of contraction in over two years. Adding to the confluence of challenges were the substantial rainfall and resultant flooding in various pockets of the nation, exerting further disruptions upon everyday activities and transportation networks.Top of Form
The base oil market in China displayed a consistent demand for domestic products; however, buying activity fell short of the anticipated robustness, while the enthusiasm for imports remained lackluster. Most local facilities continued to operate smoothly, though a couple of shutdowns experienced extensions due to market dynamics. Moreover, the commencement of operations at a new API Group III facility was postponed and now projected to materialize in late August. Conversations also hinted at the possibility of exporting some Group I cargoes from China to Asian destinations in response to a product surplus.
Base Oil price In Asia
Among the array of base oil grades, those nestled within the Group III category encountered the most pronounced downward pressure, driven by the availability surplus prevalent within the region. The resurgence of pivotal Group III production units across Asia and Europe facilitated an influx of barrels into the supply chain, which was further complemented by ample offers from the Middle East.
Anticipated softening in demand for certain weightier grades within the Group I and Group II segments was attributed to seasonal patterns. Nevertheless, the current landscape depicted a tighter availability of Group I and Group II supplies in Asia, propelled by a flurry of transactions in the preceding weeks. Buyers sought to secure deals in an effort to preempt potential price hikes amidst the backdrop of escalating crude oil and feedstock prices. Consequently, some suppliers did raise their offer levels this week. Despite these developments, certain buyers exercised prudence owing to prevailing price uncertainties, opting to wait for a clearer market outlook.
Base Oil Trends In India
In the Indian market, a lackluster demand scenario prevailed, driven by the strategic inventory buildup by numerous buyers in preparation for the monsoon season spanning June through September. This period often ushers in complexities in logistics and transportation. Buyers harbored confidence in securing domestic products due to the commendable operational performance of local plants, coupled with price reductions by domestic producers.
The horizon held expectations of several import shipments arriving during August; however, the forthcoming months could potentially witness a decline in shipments. This shift can be attributed to the tightening of spot availability in the U.S., which traditionally dispatches substantial quantities to India.
Nevertheless, notable developments included reports of South Korean cargoes extending offers for August/September shipments to India. Moreover, the market witnessed competitive bids for Group III material originating from the Middle East.
Base Oil Trends In South Korea
Beyond the Indian landscape, South Korean suppliers had cast their gaze on other Asian markets as well. Noteworthy conversations included a proposition for a 2,000-metric-ton cargo to be transported from Yeosu to Rugao, China, around mid-August. Similarly, discussions centered on a 1,500-ton parcel destined to journey from Onsan to Tianjin, China, towards the latter part of August. Another proposal involved a 1,660-ton allocation slated for lifting in Onsan, en route to Taichung, Taiwan, during the latter part of August. Further, an estimate of approximately 5,000 tons was poised for shipment from Yeosu to Southeast Asia by late August.
The realm of spot price assessments in Asia portrayed a medley of movements this week – a blend of upward shifts, steadiness, and declines across various grades. The ranges of prices depicted below encapsulate a spectrum of deliberations, bids, offers, as well as transactional agreements and published prices, widely acknowledged as benchmarks in the region.
Base Oil price In Asia
Ex-tank prices in Singapore exhibited a dichotomy in their trajectories. The solvent neutral 150 grade within Group I encountered a decrement of $10/t, settling within the range of $800/t-$830/t, while the SN500 variety held steady within the bracket of $920/t-$960/t. Simultaneously, the bright stock category witnessed a slip of $10/t, marking a range of $1,070/t-$1,110/t – all within the ex-tank Singapore context.
Shifting to the Group II spectrum, the neutral 150 grade maintained its stability, registering at $900/t-$940/t. In contrast, the 500N underwent a minor uptick of $10/t, now valuing between $940/t-$980/t, ex-tank Singapore.
With a perspective rooted in the FOB Asia framework, Group I SN150 experienced a softening, observing a decrease of $10/t and finding itself priced within the range of $670/t-$710/t. Conversely, the SN500 counterpart remained unperturbed, standing resolute within the realm of $760/t-$800/t. Meanwhile, bright stock prices embarked on a downward trajectory of $10/t, now spanning from $830/t-$870/t, FOB Asia.
Among the Group II panorama, the 150N grade retained its equilibrium, resting at $770/t-$810/t FOB Asia. However, the 500N and 600N cuts charted a marginal climb of $10/t, reflecting a revised range of $820/t-$860/t, FOB Asia.
In the realm of Group III, the landscape bore witness to a downward slide fueled by amplified availability and intensified competitive pricing. The 4 cSt grade witnessed a decrement of $20/t, leading to an assessment within the bracket of $1,430-$1,460/t, while the 6 cSt counterpart underwent an equivalent reduction, finding itself valued between $1,390/t-$1,430/t. Meanwhile, the 8 cSt grade maintained its stance, holding within the confines of $1,060-$1,100/t, FOB Asia, pertaining to fully approved products.
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