This week, the dynamics of base oil prices in Asia were diverse, influenced by distinct factors impacting each segment. API Group I and Group II prices maintained a relatively stable course due to a balanced-to-snug supply and demand scenario. In contrast, Group III values saw a decline with ample availability and subdued buying interest.
The recent surge in crude oil values appears to have reversed, leading to a drop in futures to levels not witnessed since July. This decline offers some relief to producers facing high feedstock price pressure. On Wednesday, crude oil futures fell, driven by eased concerns over supply issues in the Middle East and expectations of reduced demand from the United States and China following the disclosure of certain economic indicators.
Considering the current upstream conditions and more favorable Group II base oil margins compared to competing fuel values, refiners may choose to maintain or increase base oil production rates instead of focusing on gasoil output. Despite healthy demand for gasoil in most countries, higher base oil production levels could lead to oversupply conditions, especially towards the year-end when buyers aim to reduce inventories to avoid tax implications. Ongoing tensions in the Middle East due to the Israel-Hamas conflict and economic uncertainties have also contributed to dampened consumption levels in several Asian countries.
Base Oil Trends In Japan
Recent and ongoing plant shutdowns in the region partially counteracted the slowdown in demand. In Japan, there were reports of Eneos permanently closing its Group I plant in Wakayama, while simultaneously conducting maintenance at its Mizushima A Group I plant. The maintenance program, initiated in September, was projected to conclude this month.
Base Oil Trends In China
The availability of Group II base oils experienced a reduction due to a two-month turnaround at Formosa Petrochemical’s Mailiao plant in Taiwan, which commenced in late October. Additionally, there were unplanned shutdowns reported at a couple of Chinese Group II plants. A Malaysian producer of Group II and Group III base oils was expected to build inventories in anticipation of an extended turnaround in January, limiting its spot availability.
Demand for most base oil grades in China continued to be lackluster, prompting importers to reduce their offer levels to attract buyers. While bright stock is typically in high demand, requirements have diminished with the onset of winter. Additionally, the arrival of some Thai bright stock cargoes in China is expected to alleviate any supply tightness.
In China, Group II supply was reported to be increasing due to a recent boost in domestic output. Although the country usually imports significant quantities of Group II grades from Taiwan, the turnaround at Formosa has constrained exports from the producer. Group III supplies were deemed more than sufficient to meet demand levels, as a domestic producer has commenced operations at a new plant and has successfully met the required specifications, according to sources.
The prevailing belief that the market was well-supplied, coupled with the anticipation of a gradual decline in demand, has alleviated some pressure on Chinese buyers. This has led them to adopt a more cautious approach, carefully evaluating multiple offers before making any purchasing commitments. In response to this market sentiment, domestic suppliers have reportedly adjusted their prices downward, aiming to incentivize consumers to secure their products locally rather than opting for imports.
Base Oil Trends In India
Although base oil demand generally started to taper off in the region in late October, India stood out as an exception. Robust economic growth rates and robust demand preceding the Diwali festival, beginning on Nov. 12, led to an increase in base oil and lubricant consumption. However, most business activities were anticipated to pause during the five-day celebrations. Diwali celebrations also affected trading in Singapore and other Southeast Asian countries, where muted activities were expected in the following week.
Base oil prices had seen an upward trend in the weeks leading up to the Diwali holiday, contributing to regional price support. However, in India, prices remained steady this week as buying interest began to wane, and there were anticipations of competitive import cargoes entering the market in the upcoming weeks, as per reports.
In India, the majority of buyers have been working diligently to fulfill their base oil requirements through domestic contracts. However, there has been a surge in discussions regarding imports, with offers from South Korea, the United States, and the Middle East. Talks centered around a 3,000-ton to 4,000-ton shipment from Daesan and Pyongtaek, South Korea, to West Coast India scheduled for Nov. 21 to Dec. 10. Another proposal involved an 8,000-ton to 9,000-ton shipment from Onsan, South Korea, to Mumbai at the end of November. Additionally, there were discussions about an 8,200-metric ton cargo loading in Yanbu, Saudi Arabia, bound for West Coast India in mid to late November.
Maintaining a premium, Group I base oils in India were less affected as supplies from Southeast Asia remained constrained. In contrast, Group III exports from South Korea were considered abundant, leading to price pressure, especially for offers directed at China, where demand seemed subdued.
Base Oil price In Asia
Spot price assessments for base oil in Asia exhibited a stable to lower trend, influenced by various factors affecting each segment within the base oil market. The price ranges presented below encompass discussions, bids, and offers, along with actual transactions and published prices widely acknowledged as benchmarks for the region.
Ex-tank prices in Singapore exhibited stability compared to the preceding week. The Group I solvent neutral 150 grade was holding in the range of $840/t-$880/t, while the SN500 was reported at $990/t-$1,020/t. Bright stock was assessed at $1,220/t-$1,260/t, all ex-tank in Singapore.
Group II prices also maintained their positions, with the 150 neutral at $1,010/t-$1,040/t and the 500N stable at $1,050/t-$1,090/t, ex-tank in Singapore.
On an FOB Asia basis, Group I SN 150 remained unchanged at $790/t-$830/t, and the SN500 hovered at $890/t-$920/t. Bright stock prices were measured at $1,010/t-$1,050/t, FOB Asia, experiencing downward pressure due to softening demand.
The Group II 150N retained stability at $900/t-$930/t FOB Asia, and the 500N showed no change at $930/t-$960/t, FOB Asia.
Within the Group III segment, prices for the 4 centiStoke, 6 cSt, and 8 cSt grades experienced a decline this week. The 4 cSt was down by $20/t, ranging from $1,270 to $1,300/t, while the 6 cSt decreased by $20/t to $1,240/t-$1,280/t. The 8 cSt grade saw a dip of $30/t, now at $960-$1,000/t. All indications are FOB Asia for fully approved products.
|SN 150||SN 500||Base Stocks||N 150||N 500|