Weekly Asia Base Oil Report: 19 – 25 November 2023

The Diwali festival affected the base oil market in certain Asian countries, leading to limited activity. Meanwhile, in other countries, buyers exercised caution due to the decrease in crude oil and fuel prices following the Israel-Hamas war. This decline has raised hopes that feedstock trends will impact base oil values in the upcoming weeks. The spot ranges for API Group II and Group III have indeed experienced slight downward adjustments due to abundant supplies, weakening demand, and lower feedstock prices.

Base Oil Trends In China

The Asia-Pacific Economic Cooperation conference in San Francisco garnered market attention, particularly the meeting between U.S. President Joe Biden and China’s President Xi Jinping. While there were no high hopes that the talks would ease trade tensions between the two countries, Biden claimed it was the “most productive” conversation they had in a while. According to The New York Times, Biden made small agreements to resume military communications and urged China to limit its exports of fentanyl and related chemicals. China aimed to attract more foreign investors, as many businesses have left the country recently. However, Taiwan remained a contentious issue, and no resolution was expected to be reached during the meeting.

China’s domestic base oil production has grown in recent years with the establishment of new plants. However, one supplier faced reduced output levels this month due to feedstock supply issues. Despite this, China has become less reliant on base stock imports, thanks to the increased capacity and availability of domestic products.

Nevertheless, China still faces a deficit of heavy-grade base oils, particularly in the Group I category. To meet this demand, China continues to import heavy grades from other countries in the region. The demand for heavy grades has weakened due to seasonal patterns and the substitution of Group I cuts with Group II grades.

Throughout the week, several import cargoes were discussed, including shipments from South Korea, Singapore, and Daesan to various destinations in China. These shipments are expected to take place in November and December, covering different tonnage amounts. Overall, China’s base oil market demonstrates a mix of domestic production growth and the ongoing need for imports to fulfill specific grade requirements.

Base Oil Trends In India

Trading in India has been subdued during the week due to the celebration of Diwali, resulting in lower demand for base oils. Spot prices were driven up before the holiday as blenders prepared for increased demand and procured higher volumes. However, with the holiday ending, demand is expected to weaken, especially as lubricant consumption tends to decline towards the end of the year. The slip in fuel prices has further fueled consumers’ hopes of falling base oil values, leading to delayed purchases.

During the last quarter of the year, India typically receives significant quantities of Group II base oils from the U.S. and the Middle East. Producers aim to reduce inventories by offering attractive pricing for export destinations. However, this year, U.S. producers have managed to keep inventories low, resulting in fewer cargoes available in the market.

Despite this, shipments are still anticipated. Around 12,000 tons are expected to be shipped from the U.S. Gulf to Mumbai in the first half of November. A 2,000-ton lot was reported to have been lifted from Ruwais, United Arab Emirates, to Mumbai in early November. In late November, over 18,000 tons are expected to be shipped from Jeddah and Yanbu, Saudi Arabia, to India. A 5,350-ton cargo was quoted for shipment from Yanbu to Hazira, Mumbai, and Karachi in late November. Additional shipments include about 8,000 tons from Onsan to Mumbai and a 6,000-ton lot from Singapore to Mumbai at the end of November. In early December, a 2,590-ton cargo is likely to be shipped from Ulsan, South Korea, to Mumbai.

Base Oil Trends In Southeast Asia

In Asia, Group I supply and demand remain tight due to the shuttering of Group I production plants in recent years. The remaining plants are mostly located in Southeast Asia and Japan, where domestic demand has been robust, reducing export availability. Eneos, a Japanese refiner, permanently closed its Group I plant in Wakayama in mid-October and was completing maintenance at its Mizushima A Group I plant this month.

Group I supplies were expected to grow slightly in the coming weeks due to declining demand towards the end of the year. However, heavy-grade Group I consumption remained steady in some countries due to healthy activity levels. While most suppliers have managed to keep inventories in check throughout the year, Group II availability has been reduced by a two-month turnaround at Formosa Petrochemical’s Mailiao plant in Taiwan, which started in late October. A Malaysian producer was also expected to limit its spot availability ahead of an extended turnaround in January.

Despite these events, supply of the Group II heavy-viscosity grades seemed to be lengthening, leading to downward pressure on pricing. Demand has started to slow down as buyers and sellers aim to end the year with just enough material to keep operations running. A similar situation applied to Group III grades, where supplies have become more plentiful, leading to downward pricing pressure.

Base Oil price In Asia

In Asia, base oil spot price assessments were steady to lower, reflecting market discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region. The pricing range varied depending on the factors impacting each of the different base oil segments.

Ex-tank Singapore prices for base oils were steady to lower compared to the previous week. The Group I SN 150 grade was hovering at $840/t-$880/t, while the SN500 was assessed at $990/t-$1,020/t. Bright stock was heard at $1,220/t-$1,260/t, all ex-tank Singapore. Prices for the Group II 150 neutral remained steady at $1,010/t-$1,040/t, but the SN500 grade edged down by $10/t to $1,040/t-$1,080/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 remained unchanged at $790/t-$830/t, while the SN500 was steady at $890/t-$920/t. Bright stock prices were gauged at $1,010/t-1,050/t, FOB Asia, but were exposed to downward pressure due to weakening demand. The Group II 150N was lower by $10/t at $890/t-$920/t FOB Asia, and the 500N fell by $20/t to $910/t-$940/t, FOB Asia.

In the Group III segment, prices for 4 centiStoke, 6 cSt and 8 cSt grades were assessed lower this week. The 4 cSt was assessed down by $10/t at $1,260-$1,290/t, while the 6 cSt was also lower by $10/t at $1,230/t-$1,270/t. The 8 cSt grade edged down by $10/t as well to $950-$990/t. All indications are FOB Asia for fully approved product.