Weekly Asia Base Oil Report: 25 November – 2 December 2023

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Economic activities in certain regions saw a gradual uptick following the Diwali festivities, but the overall momentum remained subdued as the year-end approached. Both buyers and sellers adopted a cautious approach, opting for minimal volumes and lean inventories. The fluctuating prices of crude oil and feedstock heightened consumer vigilance, not only for immediate needs but also for considering contract volumes in the coming year.

The spotlight continued to be on crude oil prices, experiencing notable fluctuations throughout the week. Futures initially surged but took a downturn on Wednesday due to news of the OPEC+ postponing a scheduled meeting, where decisions on potential production cuts for the next year were anticipated. Developments such as a potential Israel-Hamas truce and the release of hostages alleviated concerns about a widespread conflict in the Middle East.

Typically, demand for base oil softens in the last weeks of the year as participants aim to maintain low inventories to avoid tax implications. This trend has been accentuated this year by economic uncertainties, geopolitical tensions, and volatility in crude oil and feedstock pricing. The outlook for lubricant demand in the early months of the year remained uncertain, prompting blenders to exercise caution in securing excessive products and leading some consumers to reduce volumes under term contracts for the next year.

In the Southeast Asian and Japanese Group I producer nations, a robust surge in domestic demand from industrial, agricultural, heavy-duty automotive, and marine sectors limited the availability of spot export transactions. Emerging demand from the Philippines and Vietnam further tightened the supply, leading to upward adjustments in the prices of the limited barrels available.

The region experienced disruptions in Group I availability due to recent and ongoing shutdowns. Japanese refiner Eneos permanently decommissioned its Group I plant in Wakayama in mid-October, and maintenance at its Mizushima A Group I plant, which began in September, was expected to conclude in mid to late November. This resulted in reduced Group I exports from Japan, prompting the need for imports to meet domestic demand.

In contrast, Group II and Group III base oils were abundant in the region, with most production plants operating smoothly, demand remaining tepid, and buyers seeking lower pricing. Formosa Petrochemical’s Mailiao Group II plant in Taiwan underwent a two-month turnaround starting in late October, and a Malaysian Group II and Group III producer planned to build inventories before an extended turnaround in January, limiting spot availability.

Despite expectations of increased Group II availability in December, suppliers aimed to maintain firm offers, resisting pressure from buyers to lower prices. Refiners considered adjusting base oil production rates to prevent an excessive product overhang and declining indications in the coming weeks. Group III facilities ran efficiently, with additional cargoes available from the Middle East.

In China, one of the region’s major markets, lackluster demand for imports prevailed as domestic output seemed sufficient to meet most needs. However, a chronic deficit of heavier grades led to some import transactions, particularly for Group I bright stock. Importers exercised caution in securing products due to potential impacts from crude oil fluctuations and a desire to avoid holding high-priced inventories amid uncertainties in the downstream lubricant market.

Discussions regarding several import cargoes for December included a 3,800-metric ton lot from Onsan, South Korea, to Tianjin at the end of December, a 6,000-ton cargo from Onsan to Huizhou in mid-December, and a 3,750-4,000-ton parcel from Thailand to China in the second half of December. Approximately 11,000 tons were mentioned for shipment from Daesan, South Korea, to Tianjin in the first week of December.

Demand for Group III grades weakened in China, prompting Group III producers to adjust run rates to prevent price declines. In contrast, Group II prices faced pressure as domestic producers completed turnarounds, maintaining high production rates.

In the Indian market, there was an increase in demand leading up to the Diwali holidays commencing on November 12. However, activity slowed during the festive week, and as participants gradually resumed business, it remained relatively subdued. The year-end proximity added to the subdued atmosphere, as buyers typically aimed to order only the necessary volumes to sustain day-to-day operations. Concurrently, it presented an opportune time to secure favorable pricing, especially as suppliers sought to reduce inventories. This trend, notably observed in import discussions, involved cargoes from the United States, Middle East, and Northeast Asia.

Similar to other Asian nations, India benefited from abundant supplies of Group II and Group III grades but faced a shortage of Group I offerings. Local plants operated efficiently, prompting most buyers to prefer securing volumes domestically to avoid potential devaluation of imported cargoes. Anticipated arrivals of imported Group II cargoes in the coming weeks were expected to alleviate some of the demand for these grades. Looking ahead, a 6,000-metric ton shipment from Singapore to Mumbai was expected in late November, with around 8,000 tons slated to move from the Red Sea to the West Coast of India by the end of November. Additionally, over 3,000 metric tons were quoted for shipment from Ulsan, South Korea, to Mumbai in the first half of December. Discussions also included a 5,000-ton lot for shipment from Antwerp, Belgium, to Mumbai in mid-December and about 3,000 tons from Ulsan to Mumbai in the first half of December.

Base Oil price In Asia

In the Asian base oil market, spot prices exhibited a mixed trend during the week. While prices for some grades declined, others remained unchanged, and some experienced slight increases. Despite healthy demand for Group I, bright stock prices either remained stable or dipped due to a seasonal drop in demand. The price ranges presented below encompass discussions, bids, and offers, as well as deals and widely acknowledged published prices serving as benchmarks for the region.

Ex-tank Singapore rates displayed a mixed trend in comparison to the previous week. The Group I solvent neutral 150 grade saw a slight increase of $10/t, ranging from $850/t to $890/t, while the SN500 remained steady at $990/t to $1,020/t. Bright stock, however, experienced a decrease of $20/t, settling at $1,200/t to $1,240/t, all ex-tank Singapore.Group II prices maintained their positions with the 150 neutral at $1,010/t to $1,040/t and the 500N holding steady at $1,040/t to $1,080/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 observed a minor uptick of $10/t, reaching $800/t to $840/t, and the SN500 also saw a $10/t increase at $900/t to $930/t. Bright stock prices remained constant at $1,010/t to $1,050/t, FOB Asia.In the Group II category, the 150N experienced a decline of $10/t ranging from $880/t to $910/t FOB Asia and the 500N also slipped by $10/t to $900/t to $930/t FOB Asia.

Within the Group III segment prices for 4 centiStoke (cSt), 6 cSt and 8 cSt grades showed a downward trend this week. The 4 cSt grade saw a decrease of $10/t settling at $1,250/t to $1,280/t while the 6 cSt grade lowered by $10/t to $1,220/t to $1,260/t. The 8 cSt grade also inched down by $10/t to $940/t to $980/t. All indications are FOB Asia for fully approved products.

SN 150 SN 500 Base Stocks N 150 N 500
Singapore $850/t-$890/t $990/t-$1,020/t $1,200/t-$1,240/t $1,010/t-$1,040/t $1,040/t-$1,080/t
FOB Asia $800/t-$840/t $900–930/t $1,010/t-1,050/t $880/t-$910/t $900/t-$930/t
Price Per Ton Base Oil In Asia 25 November–2 December 2023
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