Although crude oil and feedstock values have decreased, demand for base oil has begun to show indications of rebounding, and spot supply has become more constrained.
Due to better margins, some refiners decreased their output of base oil in favor of fuels, but it now seems that the trend has changed and base stock production is more desirable—possibly with the exception of Indian fundamentals.
China’s promising economic recovery prospects also fueled expectations of higher base oil and lubricant used in that critical market.
Base Oil Trends In China
The demand for imports has increased because of the restricted domestic supply of some grades, with particular interest shown in API Group II and Group III supplies. A few South Korean providers were said to have obtained business in China. There were a few Chinese base oil plants that were either still operating at reduced rates or had been shut down for repairs or inspections.
It was also projected that the race to grow the number of electric vehicles on Chinese roads will influence the kind of lubricants and automotive fluids needed in the upcoming years, possibly limiting the use of conventional base oils.
The government’s gradual elimination of incentives for car purchases has also caused a substantial decline in auto sales since the year’s beginning. But, insiders emphasized that a strong manufacturing sector would require more base stocks for heavy-duty cars and industrial uses.
A number of cargoes were being considered for export to China, with roughly 2,000 metric tons quoted for lifting in Onsan, South Korea, to Huizhou in mid-March, even though Chinese domestic base oil prices were still thought to be competitive against imports.
In late February, a 2,200-ton package was scheduled to be shipped from Ulsan to Tianjin. Also, in the middle of March, 7,000 metric tons of lifting from Ruwais, United Arab Emirates, to Nantong was quoted.
Base Oil Trends In Southeast Asia
Southeast Asia has also seen an increase in activity as blenders stock up on lubricants in anticipation of a busier season and more travelers after nearly three years of tepid weather brought on by the COVID outbreak. As a result, purchasers tended to purchase smaller cargoes to reduce their exposure to price swings and potentially poor performance in downstream markets. At the same time, economic uncertainty continued to have a negative impact on business.
Group I supplies were generally constrained in the region, while stocks of other grades were also depleted. One factory in Indonesia is reportedly undergoing maintenance, while light grades from Japan and Thailand are reportedly scarce. The pricing difference between Group I and Group II grades is also likely to prompt more Group I cuts to be sought after in the coming weeks.
With several cargoes anticipated to be shipped from South Korea and the Middle East to Southeast Asia next month, there has been an increase in interest in imports from a variety of sources.
Two base oil grades were expected to be sent in a 4,400-ton shipment from Yanbu, Saudi Arabia, to Singapore in the middle of March, while about 3,000 tons were predicted to be lifted in Onsan and sent to Merak, Ciwandan, and Gresik, Indonesia, at the beginning of March.
Separately, a shipment of 1,000 tons was mentioned for late March or early April from Sri Racha, Thailand, to Manila, Philippines. In mid-April, a 1,000-ton package was also quoted for delivery from Mailiao, Taiwan, to Port Klang, Malaysia.
Base Oil Trends In India
India’s consumer spending has remained robust, with domestic supply covering an increasing share of the nation’s demand. It was reported that the majority of refineries have been operating at peak efficiency and benefiting from the opportunity to handle cheaper Russian crude oil. With the high retail costs for diesel and the high fuel usage, a few refiners may continue to produce more diesel than base oils.
Over the past week, there have been discussions about a number of South Korean cargoes that will be shipped to India, including a 1,500-ton shipment of three base oil grades that will be sent immediately from Ulsan, South Korea, to Mumbai and 5,000 to 7,000 tons that will be lifted in Yeosu or Ulsan and sent to Mumbai in the first half of March.
Over the past week, there have been discussions about a number of South Korean cargoes that will be shipped to India, including a 1,500-ton shipment of three base oil grades that will be will be sent immediately from Ulsan, South Korea, to Mumbai and 5,000 to 7,000 tons that will be lifted in Yeosu or Ulsan and sent to Mumbai in the first half of March.
About 4,000 tons were also expected to be lifted in Ulsan or Daesan for delivery in Mumbai in the second half of Feb. In addition, there were rumors that a sizable shipment would be traveling from Spain to India.
The demand for Group III products is still strong in the area, and exports have done well, with South Korean goods still making frequent trips to the United States.
Base Oil export price In Asia
Prices were deemed generally stable because of balanced supply against demand. This week, stable pricing was supported in Asia by increasing buying activity and decreasing base stock availability.
Ex-tank Singapore prices were steady from the previous week. Spot prices for the Group I solvent neutral 150 grade remained constant at $920/t-$950/t, and the SN500 was heard at $1,030/t-$1,070/t.
The bright stock was firmly placed between the price ranges of $1,290/t and $1,330/t, all ex-tank Singapore. Prices for the 500N were stable at $1,000/t-$1,050/t and those for the Group II 150 neutral were stable at $970/t-$1,010/t, ex-tank Singapore.
Group I SN150 was stable at $790–830/t on a FOB Asia basis, and the base oil SN500 was at $840–880/t. Bright stock prices, FOB Asia, were ranging between $1,070/t and 1,110/t.
The price for the Group II 150N remained stable at $840/t–$880/t FOB Asia, while the prices for the 500N and 600N cuts ranged from $860–$890/t, FOB Asia.
Prices were largely stable in the Group III market as well. The 4 centiStoke was valued between $1,520 and $1,560 per ton, and the 6 cSt was between $1,490 and $1,530 per ton. For completely certified goods, the 8 cSt grade was estimated at $1,210-1,250/t, FOB Asia.
| SN 150 | SN 500 | Base Stocks | N 150 | N 500 | |
|---|---|---|---|---|---|
| Singapore | $920/t-$950/t | $1,030/t-$1,070/t | $1,290/t-$1,330/t | $970/t-$1,010/t | $1,000/t-$1,050/t |
| FOB Asia | $790/t-$830/t | $840–880/t | $1,070/t-1,110/t | $830/t-$870/t | $850/t-$880/t |
