In certain countries, the demand for base oil has surged due to warmer temperatures, while it has declined in others, particularly in China. This decline could be attributed to scheduled plant turnarounds in Asia, which are anticipated to restrict spot supply from various producers. Although prices have generally remained stable, a few grades have weakened due to reduced buying interest.
This week, market focus shifted to the annual Group of 7 summit held in Hiroshima, Japan. Leaders from Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Union gathered to address geopolitical concerns and strategies for ensuring global economic stability. Recent months have seen base oils and lubricants demand affected by economic uncertainties, inflation, and the possibility of a global recession.
Base Oil Production and Maintenance Impact in Asia and Europe
Concerning the production of base oil, a major facility in Singapore experienced maintenance work on some of its base oil trains, which lasted for about two months starting from the end of April. This maintenance primarily impacted the supply of API Group II base stocks in Southeast Asia. Additionally, unplanned outages at a few plants in the region have led to a decrease in availability of Group I base stocks. However, this reduction coincided with a decline in demand for these grades.
In the context of Northeast Asia, a South Korean producer of API Group II and Group III base oils has planned an extensive maintenance period starting in late May. As a result, spot availability is expected to be restricted. Similarly, a Japanese refiner has scheduled a two-month turnaround at its refinery, potentially impacting Group I base oil production and limiting supply from the producer.
Another Japanese producer is currently undergoing a turnaround between late April and June, affecting Group II output. Furthermore, the sole Taiwanese producer of Group II base oil is anticipated to undergo maintenance in October, leading to inventory buildup and reduced spot sales. Consequently, there may be a decrease in exported volumes to China in the coming months.
A Group III facility in Europe is currently undergoing a turnaround, but it is not expected to impact supply in the European Union or other regions. The producer’s affiliate plant in South Korea is believed to be producing additional volumes to meet the European market’s needs during this period.
Base Oil Trends In China
Several Chinese plants are also undergoing turnarounds, with some units operating at reduced rates. However, production has resumed in others. Most of China’s base oil requirements are being met domestically, except for certain heavy viscosity grades.
Although regional producers typically import these grades, demand for imports has been subdued in recent weeks, possibly due to sluggish demand from the industrial and automotive sectors and declining domestic prices. Importers have been lowering their offers to attract buyers. In contrast, Group III grades have maintained their prices due to tighter availability. A small cargo of 1,500 metric tons is being quoted for shipment from Daesan, South Korea, to Zhuhai in June.
China’s automotive market has witnessed robust sales in 2023, surpassing the previous year’s figures impacted by stringent zero-COVID measures. According to Nikkei Asia, electric vehicle sales are expected to contribute around one-third of the total automobile purchases. The China Association of Automobile Manufacturers predicts a 3% growth in overall vehicle sales this year, reaching 27.6 million units.
Base Oil Trends In Korea
Group II base oil grades garnered significant attention in other regions, generating discussions around export transactions involving South Korean suppliers. Anticipating potential supply constraints, these suppliers aimed to raise offer levels, but buyers have pushed back against the higher prices. Seeking opportunities beyond Asia, South Korean suppliers have explored the possibility of shipping a cargo ranging from 7,000 to 9,000 tons from South Korea to South America in late May or June.
Base Oil Trends In India
Certain market segments in India displayed a strong interest in purchasing base oils, but buyers were hesitant to make significant commitments in anticipation of potential price declines. With the arrival of import cargoes from South Korea, the U.S., and the Middle East, buyers felt comfortable delaying their purchases as they believed there was an ample supply to meet their needs. Furthermore, local refiners remained a reliable source of base oils for many consumers. Additionally, there were discussions about the availability of Iranian Group I material being offered in the Indian market.
India recently concluded the purchase of a few significant Group II cargoes from the U.S., with the possibility of additional volumes becoming available as a key U.S. Group II plant resumed operations after a turnaround. Another Group II unit is scheduled for maintenance in June, and afterward, increased base oil output is expected from both U.S. units due to a catalyst change. Discussions are also underway for several Asian cargoes to be shipped to India, including lots from South Korea, Malaysia, and the Arabian Gulf, destined for various Indian ports in June and May.
Base Oil price In Asia
In Asia, spot prices for base oil remained relatively stable or slightly softer, reflecting the prevailing supply and demand conditions. Ex-tank Singapore prices showed little change compared to the previous week.
The Group I sn150 base oil grade maintained its price range of $920/t-$950/t, while the SN500 grade saw a slight decrease of $10/t to $1,020/t-$1,060/t. Bright stock prices remained steady at $1,260/t-$1,300/t, all ex-tank Singapore.
For Group II base oils, the 150 neutral grade was assessed at $1,010/t-$1,050/t, and the base oil sn 500 grade ranged from $1,040/t-$1,090/t, ex-tank Singapore. These prices are derived from discussions, bids, offers, and established benchmarks in the region.
Group I base oil prices showed some downward movement on an FOB Asia basis. The SN150 grade decreased by $10/t to $750/t-$790/t, while the SN500 grade remained steady at $870/t-$910/t. Bright stock prices remained unchanged at $1,010/t-$1,050/t, FOB Asia.
For Group II base oils, the 150N grade saw a slight decrease of $10/t to $900/t-$940/t, FOB Asia, while the 500N and 600N cuts remained unchanged at $940/t-$980/t, FOB Asia.
In the Group III segment, prices were stable to softer compared to the previous week. The 4 cSt grade at the higher end of the range decreased by $10/t to $1,520/t-$1,550/t, while the 6 cSt grade remained steady at $1,490/t-$1,530/t. The 8 cSt grade showed a decrease of $10/t to $1,110/t-$1,150/t, FOB Asia, for fully approved product.
|SN 150||SN 500||Base Stocks||N 150||N 500|
Crude oil and feedstock prices continued to experience volatility, with fluctuations influenced by Chinese economic data and optimism surrounding oil demand and U.S. debt ceiling negotiations. Brent July futures were trading at $76.55 per barrel on May 18, up from $75.26/bbl on May 11. Dubai front month crude oil futures settled at $75.18 per barrel on May 17, the same level as on May 10.