As traders returned to the market after vacations and several weeks of quiet trading, base oil market activity in Asia increased. Based on improved demand, higher crude oil and feedstock values, and stable or slightly higher offer levels, producers were either maintaining or slightly raising base oil prices. However, the abundance of most grades and buyers’ confidence that they would be able to obtain material from various sources helped to offset some of this pressure.
Following the imposition of European Union sanctions on Russian refined products on February 5, regional refiners will also be evaluating the allocation of feedstocks in their refining operations as diesel and vacuum gasoil supplies were anticipated to become more constrained globally. A push to produce more distillates at the expense of base oil could result in a shortage of the latter.
Base Oil Trends In China
China, which had been relatively quiet prior to and during the Lunar New Year or Spring Festival celebration the previous weeks, was one of the markets that seemed to have started to recover. Before the holidays, the majority of buyers had reduced their inventories, and they were prepared to begin restocking. Since December, the abrupt abandonment of the government’s zero-COVID policies and a sharp increase in infections have had an impact on industrial performance and consumer spending. However, there is more hope that economic growth will be stronger in 2023.
Although it was still too early to tell whether demand for lubricants would be steadily increasing, there had been an increase in demand prior to the holidays because of the significant influx of people traveling to their hometowns. Compared to last year, the number of travelers by car increased dramatically this year as COVID restrictions were lifted.
The approaching spring oil season also required blenders to increase lubricant production to keep up with the potential for strong demand. As a result, domestic base oil prices have stabilized and there was heightened interest in imports. Domestic availability was also being hampered by ongoing and upcoming plant turnarounds. The availability of API Group I heavy grades from Southeast Asia was also on the tight side, particularly for heavy grades, which are the cuts China has a deficit of.
Even though the sole Taiwanese Group II supplier was anticipated to have limited spot availability over the coming weeks, a number of Group II cargoes, including some from Taiwan, were being discussed for shipment to China. The producer was reportedly limiting spot supplies while preparing for a turnaround and building inventories to cover term commitments during the outage. In late February, it was discussed whether to ship South Korean cargo from Onsan to Taichung, Taiwan.
Base Oil Trends In South Korea
As demand for term volumes was expected to rise in the upcoming weeks, regional suppliers, including South Korean producers, were closely monitoring their spot availabilities. Even so, a number of South Korean cargoes, including a 5,000 metric ton lot from Daesan to Tianjin in mid-February, were being considered for potential shipment to China.
Group II supplies were considered to be in ample supply in the area, but the heavy grades have begun to tighten due to increased buying interest, which has prompted suppliers to raise their offer levels. With a South Korean Group II and Group III plant undergoing a turnaround in June, Group III cargoes may move more slowly in the second quarter but have continued to move steadily throughout the region.
Base Oil Trends In India
The requirement to complete business in India prior to the fiscal year’s end on March 31 provided blenders with an additional incentive to produce more lubricants and sell them before the deadline, which attracted buyers back to the base oils market. Buyers returned to the trading scene as a result of the prices appearing to have bottomed out and the potential for price growth in the upcoming weeks.
South Korean offers inched up, particularly for flexible volumes, and were expected to remain firm as requirements mount. Competitively priced domestic Indian material produced from deeply discounted Russian crude oil was considered an attractive option. Nevertheless, several import cargoes were discussed for shipment to Indian ports. A 3,000-ton cargo was expected to have been concluded for shipment from Onsan, South Korea, to Mumbai in the first few days of February.
At the end of the month, Singapore was mentioned for the lifting of roughly 18,000 tons to West Coast India and the United Arab Emirates. In early March, it was also being discussed to ship a 2,000 to a 2,500-ton parcel from Singapore to Mumbai or Hamriyah, United Arab Emirates. At the end of January, it was stated that a 15,500-ton lot had been completed from Yanbu, Saudi Arabia, to Mumbai and the West Coast of India.
Base Oil export price In Asia
In late February, 6,000 tons were scheduled to be shipped from Ruwais, United Arab Emirates, to Chennai and the West Coast of India. In the second half of February, a 2,000-ton shipment from Rayong, Thailand, to Mumbai or Hazira was also under consideration.
Singapore ex-tank prices remained constant week over week. Spot prices for the SN500 were estimated at $1,030/t-$1,070/t, and for the Group I solvent neutral 150 grade at $920/t-$950/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 Group II 150 neutral held steady at $970/t to $1,010/t, and prices for the 500N held steady at $1,000/t to $1,050/t, ex-tank Singapore.
Group I Base Oil SN150 remained constant at $790–830/t on a FOB Asia basis, while the Base Oil SN500 increased by $20/t to $840–880/t. Bright stock prices, FOB Asia, were ranging between $1,070/t and 1,110/t.
The price of the Group II 150N increased by $30/t to $830/t to $870/t FOB Asia, and the price of the 500N and 600N cuts also increased by $30/t to $850/t to $880/t FOB Asia.
Prices in the Group III segment remained constant from the previous week. 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 a fully approved product, the price for the 8 cSt grade was mentioned as $1,210-1,250/t, FOB Asia.
Upstream, crude oil futures increased for the third day in a row on Wednesday as comments from the head of the U.S. Federal Reserve allayed fears about potential interest rate increases and an Iranian official said that OPEC+ was likely to stick to its production schedule.
On the London-based ICE Futures Europe exchange on February 9, Brent April futures were trading at $85.17 per barrel, up from $82.80/bbl on February 2.
On February 8, the CME’s Dubai front-month crude oil (Platts) financial futures for March settled at $81.79 per barrel, up from $79.45/bbl on February 1.
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