Last week in several Asian countries, the celebration of the Lunar New Year caused a decrease in economic activities, and this decrease was seen even in a key market such as China. Due to fluctuating base oil prices and consumers delaying purchases in the hopes of lower prices after the holidays, even the period leading up to the holidays had not produced much new business.
The values of crude oil and feedstock futures continued to be quite volatile and were affected by socioeconomic factors, supply and demand expectations, and other factors, so they were unable to serve as a reliable predictor of future price changes.
With the lifting of COVID lockdowns in China earlier this week, oil demand is expected to rebound, pushing Brent and West Texas Intermediate crude futures to their highest levels since early December.
Tuesday saw a three-month high for refining margins as tight fuel supplies were put under strain by unforeseen refinery outages brought on by heavy storms along the US Gulf Coast.
On Wednesday and Thursday of this week, oil futures traded within a constrained range as data revealed a smaller-than-expected increase in U.S. crude stockpiles, countering dismal economic reports from earlier in the week. Investors were also anticipating the outcomes of the OPEC+ meeting on February 1 and the impending embargo on Russian refined products by the European Union.
With the easing of COVID lockdowns in China earlier this week, oil demand is expected to rebound, pushing Brent and West Texas Intermediate crude prices to their highest levels since early December. Tuesday saw a three-month high for refining margins as tight fuel supplies were put under strain by unforeseen refinery outages brought on by heavy storms along the US Gulf Coast.
On the London-based ICE Futures Europe platform, Brent March futures were trading at $86.34 per barrel on Jan. 26, up from $84.29/bbl on Jan. 19.
On January 25, the CME settled the February Dubai front-month crude oil (Platts) financial futures at $83.02/bbl, up from $81.82/bbl on January 18.
The global supply of gasoline and diesel may be influencing refiners’ decisions in the future. According to OilPrice.com, Russia is presently the EU’s top supplier of fuels, particularly diesel, and the EU placed an embargo on imports of Russian fuel starting on February 5. The United States won’t be able to step in and help the way it did with LNG deliveries as a replacement for Russian pipeline gas because its supply of diesel is extremely limited, which means there will likely be a shortage of these refined products. Due to the increased competition among buyers of these feedstocks, refiners may favor the production of distillates over base oil output, especially if gasoil and diesel prices rise.
The bulk of Asian refineries was operating at maximum capacity, which contributed to the plenty of base oil supply and the consequent downward pressure on pricing. To cut supply and boost margins, several refiners reportedly resorted to reducing base oil production.
Base Oil Trends In China And South Korea
The first quarter of the year is expected to see many turnarounds at factories in Singapore, and Indonesia, and numerous units in China; this, combined with predictions of a seasonal uptick in demand, may cause a tighter supply.
During this time of the week, companies and businesses close for a few days as millions of people head back to their homes in other cities or the countryside.
Demand was projected to rise after the Lunar New Year celebrations as base oil reserves were thought to have been exhausted and blenders began preparing their inventories for the busy spring production cycle. Several domestic bases oil plants have been operating at reduced capacity or have temporarily shut down, and some base oils, notably the heavier grades, which are chronically short in China, were anticipated to be scarce.
Early in February, preparations were being made for many South Korean shipments to China, including a 5,000 metric ton shipment of four grades from Yeosu to Zhenjiang between Feb. 6 and 10. There were plans to convey a 1,600-ton package from Onsan to Jingjiang. The shipment of an additional 1,000 tons from Onsan to Zhenjiang was indicated. The hoisting of approximately 16,000 tons from Yeosu to Rugao and Zhenjiang between February 15 and 25 was under consideration. A 4,600-ton shipment from Singapore to South and North China was also mentioned for mid-February.
Next month, South Korean suppliers are also anticipated to ship goods to numerous locations throughout the world, including a 2,000-ton shipment that will be lifted in Yeosu and Ulsan and delivered to Manila, Philippines, in the middle of February. and 10,000 tons in the second half of February from a port in South Korea to Lagos, Nigeria. Early in February, it was claimed that a tiny cargo will be shipped from Onsan to Merak, Indonesia, and another little package would go to Tanjung Priok, Indonesia. In Ulsan, quotes for lifting 10,000 tons to the Caribbean during the second half of February were also provided.
Base oil India Report
Due to a national holiday on Thursday and a lack of discernible pricing movement, activity in India this week was fairly sluggish. To minimize the risk of maintaining expensive inventories should prices decline, many buyers waited on the sidelines and restricted their purchase quantities.
Because manufacturers could run refineries on significantly less Russian crude oil, local supplies were viewed as adequate and competitive. As a result, customers felt more secure knowing they could acquire things immediately. However, it also showed that there has been a rise in interest in buying imports at reasonable costs to address future product needs.
Several import cargoes were in the works, and since plants have finished turnarounds and there is more inventory available for export, several movements were anticipated from the Middle East. In the second half of February, it was planned that 6,000 tons would be transported from Ruwais, United Arab Emirates, to Mumbai or Kandla and potentially other ports. In the middle of February, a shipment of over 16,000 tons was mentioned from Ras Laffan and/or Sitra, Bahrain, to the West Coast of India.
To increase profits, South Korean suppliers increased the volume of their offers in India, which may have decreased buyer interest. In late February, it was mentioned that 5,000 to 7,000 tons would be lifted in Yeosu or Ulsan, South Korea, then transported to Mumbai. A 4,000-ton shipment from Sri Racha and Rayong, Thailand, to the west coast of India and/or Ras Al Khaimah, United Arab Emirates, was considered for transport in the second part of February.
Base Oil Export In Asia
Spot base oil prices in Asia essentially held steady due to a delay in trading and a dearth of reported transactions during the Lunar New Year holiday week. The price ranges displayed here are based on discussions, offers, and bids as well as agreements and prices that have been publicized and are frequently used as regional benchmarks.
Singapore ex-tank pricing remained constant week over week. The SN500 remained at $1,030/t-$1,070/t, and spot prices for the API Group I solvent neutral 150 grade were estimated at $920/t-$950/t. Bright stock held steady between $1,280 and $1,320 per tonne, all ex-tank Singapore.
Prices for the Group II 150 Neutral were estimated to be between $970 and $1,010 per tonne, while for the 500N, they remained between $1,000 and $1,050 per tonne, ex-tank Singapore.
Group I Base Oil SN150 was trading between $790 and $830 per tonne FOB Asia, while the SN500 was trading between $820 and $860 per tonne. Bright stock prices were consistently set between $1,060/t and $1,100/t, FOB Asia.
The Group II 150N was heard at between $800 and $840 per ton FOB Asia, while the 500N and 600N cuts were stable at between $820 and $850 per ton FOB Asia.
Prices in the Group III segment remained constant. The price for the 4 cSt was set at $1,520 to $1,560/t, and the price for the 6 cSt was $1,490 to $1,530/t. For a completely certified product, the 8 cSt grade was heard at $1,210-1,250/t, FOB Asia.
| SN 150 | SN 500 | Bright Stock | N 150 | N 500 | |
|---|---|---|---|---|---|
| Singapore | $920/t-$950/t | $1,030/t-$1,070/t | $1280/t-$1320/t | $970/t-$1010/t | $1000/t-$1050/t |
| FOB Asia | $790/t-$830/t | $820/t-$860/t | $1,060/t-$1,100/t | $800/t-840/t | $800/t-$850/t |
