On Thursday, March 14, Brent May 2024 crude futures were trading at $84.61 per barrel on the London-based ICE Futures Europe exchange, from $82.61/bbl on March 7.

Dubai front month crude oil (Platts) financial futures for April 2024 settled at $83.70 per barrel on the CME on March 13, from $81.87/bbl for March futures on March 6.

Tight supplies of API Group I grades as a result of recent plant shutdowns and healthy demand continued to place pressure on spot pricing. Most of the plant outages took place in Southeast Asia – currently the main Group I production hub in Asia – and there have been permanent plant closures in Japan. Suppliers raised their offers as they received keen buying interest, and while buyers resisted the steeper values, they eventually acquiesced to small increases as there were few options to secure product somewhere else, except for replacing Group I grades with Group II cuts, but not all formulations allowed this. Group I bright stock is also very difficult to replace, and therefore summoned heftier markups. Small cargoes of Thai Group I base oils changed hands during the week, and there were expectations that Chinese buyers would be looking for bright stock cargoes in the next few weeks.

Some blenders preferred to use Group II grades whenever possible as prices have been very competitive on ample regional supply. However, this situation may be changing as Group II availability has tightened on revived buying interest and reduced output at some facilities, and this has driven suppliers to seek higher prices for April shipments.

The Hyundai-Shell Group II plant in Daesan, South Korea, was heard to have had a partial shutdown for most of the month of February because of maintenance at the refinery that supplies feedstocks and continued to run at reduced rates, although this could not be confirmed with the producer directly.

Formosa Petrochemical, the sole Taiwanese producer, was heard to be undergoing a partial shutdown since early March that was expected to last for almost two months, due to maintenance at the affiliated refinery, which supplies feedstocks to the Group II base oils plant. Formosa routinely ships base oils to China, India, the Middle East and other destinations, aside from supplying the domestic market. It was heard that shipments from the Taiwanese plant to China and other destinations will be reduced this month, but spot supplies from the producer were anticipated to increase after the refinery maintenance is completed in late April.

ExxonMobil was heard to have shipped Group II cargoes from its facilities in Singapore to Europe to meet commitments there while its plant in Rotterdam, the Netherlands, completes a two-month turnaround which started in January. The producer’s supplies were tight system-wide, according to sources.

Supplies of Group III grades were described as plentiful in Asia, but a recent Group III plant turnaround in Malaysia, and upcoming maintenance in South Korea were likely to reduce spot availability.

The Petronas Group II and Group III refinery in Melaka, Malaysia, was heard to have completed a maintenance program that started in late January, and even though a large part of the producer’s output is used for the company’s own downstream operations, small spot cargoes from the facility have been on offer for March shipment.

SK Enmove was understood to be starting a turnaround at its Group III units in Ulsan, South Korea, on March 13 that will be completed in late April. The company will be able to meet requirements as they have built stocks and have continuous production at other sites, but the shutdown was expected to tighten short-term inventory.

There were also reports that the SK-Pertamina Group III plant in Dumai, Indonesia, would be undergoing a partial shutdown in May, but the effects were expected to be minimal as the producer will build inventories to cover commitments during the outage, according to sources.

In China, a number of Group II base oils plants have also been scheduled for maintenance this month, and this may coincide with a slowing pace in many segments due to economic uncertainties, despite anticipation of increased activity ahead of the spring season. Participants expected to see some demand for imports of the heavier Group I and Group II grades given that China is still structurally short on the heavy viscosities, even though domestic capacity of most grades has increased in recent years. A local Group III producer continued to offer attractive prices to conquer market share, but demand for Group III cuts was generally lagging compared to the other grades.

With regional supplies tightening, buyers appeared somewhat interested in securing import cargoes, even if that meant having to pay higher prices. A 2,000-metric ton cargo made up of four grades was expected to be lifted from Onsan, South Korea, to Tianjin at the end of March, and a second 1,800-ton lot was also expected to have been shipped from Onsan to Zhenjiang.

One bright spot in Asia appeared to be India, as buying appetite has grown ahead of the end of the fiscal year on March 31, and was expected to remain robust in the next few months. Demand will then likely be dampened by the arrival of the monsoon season in early June. Blenders were on the lookout for Group I and Group II grades and worried about potential shortages as a local producer has experienced some production hiccups and regional supplies have also tightened.

Offer prices for imports have moved up and buyers appeared willing to accept steeper indications despite initial resistance, with prices for Group I and Group II grades in India edging up by $5 per metric ton to $10/t on a CFR basis week on week and the heavy grades seeing the larger increases. Group III assessments were also on the rise this week as buying interest has strengthened. Up to 15,000 tons of base oils were being discussed for shipment from Singapore to West Coast India in late March. An 11,000-ton lot was also mentioned for shipment from Cartagena, Spain, to India in late March. An unusual 14,000-ton cargo was quoted for shipment from Fortaleza, Brazil, to WCI in the second half of March.

Several recent and upcoming turnarounds were expected to limit Group III spot supplies. The Petronas Group II and Group III refinery in Melaka, Malaysia, was heard to have completed a maintenance program earlier this month that had started in late January, and even though a large part of the producer’s output is used for the company’s own downstream operations, small spot cargoes from the facility have come to market.

SK Enmove was understood to have started a turnaround at its Group III units in Ulsan, South Korea, on March 13 that will be completed in late April. The company will be able to meet requirements as it has built stocks and has continuous production at other sites, but the shutdown was expected to tighten short-term inventory.

There were also reports that the SK-Pertamina Group III plant in Dumai, Indonesia, would be undergoing a partial shutdown in May, but the effects were expected to be minimal as the producer will build inventories to cover commitments during the outage, according to sources.

Market participants kept an eye on the ongoing Houthi attacks on container ships and oil tankers in the Red Sea, with one of the most recent attacks resulting in several casualties. The shipping disruptions have driven freight rates up and shipping times have also almost doubled as vessels that typically cross the Suez Canal to reach Europe and other destinations had to be rerouted around the southern tip of South Africa. Freight rates on certain routes continued to be exposed to upward pressure and vessel space was limited as many ships moving products from Asia and the Middle East were engaged on the longer route.

Despite the transportation issues and production outages affecting some shipments, South Korean producers have been busy concluding transactions to Asian destinations and beyond. Several smaller lots were expected to be shipped from Yeosu between April 5 and April 20, with a 1,000-ton cargo expected to be moving to Singapore, a second 1,000-ton lot to Dong Nai, Vietnam, and a third cargo of similar size to Port Klang, Malaysia. A 2,000-ton cargo was heard to have been concluded for lifting in Daesan to Hamriyah, United Arab Emirates (UAE), in mid-March.

Additionally, about 5,500 tons base oils were expected to be shipped from Yanbu and Jeddah, Saudi Arabia, to Singapore in the second half of March. A 2,500-ton parcel was mentioned for shipment from Paulsboro, U.S., or the U.S. Gulf to Singapore in the first half of April.

Base oil spot prices in Asia were steady to firm this week, with some prices moving up on tight conditions and increased offer levels. The price ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were steady to firm from the previous week. The Group I solvent neutral 150 grade was adjusted up by $10/t to $880/t-$920/t, but the SN500 was steady at $1,000/t-$1,040/t. Bright stock jumped by $30/t to $1,280/t-$1,320/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were holding at $960/t-$990/t, and the 500N was unchanged at $1,010/t-$1,050/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was holding at $750/t-$790/t, while the SN500 was assessed slightly up by $10/t at $890/t-$920/t. Bright stock prices were firm at $1,080/t-1,120/t, FOB Asia on tight supply.

The Group II 150N was steady at $820/t-$860/t FOB Asia, but the 500N was assessed higher by $20/t at $900/t-$940/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were stable to soft. The 4 cSt grade was hovering at $1,060-$1,090/t, but the 6 cSt slipped by $10/t to $1,070/t-$1,110/t on lackluster demand. The 8 cSt cut was unchanged at $930-$970/t. All indications are FOB Asia for fully approved product.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.