Group I demand remained healthy in the region, despite weaker base oil buying interest from China, which typically imports heavy grades and bright stock as the country has a deficit of these cuts. Group I production in Southeast Asia was steady and availability for September shipments was deemed adequate, but not as ample as expected as some cargoes have already been spoken for. August shipments were brisk, and this has reduced any product overhang, with some suppliers offering only flexibag-sized cargoes of certain grades. Given snug availability of some Group I cuts, a few buyers have switched to Group II grades when formulations allowed.

Group II base oil availability has tightened because of transactions finalized over the last couple of weeks as buyers were hoping to beat potential price hikes driven by higher crude oil prices. Upcoming plant turnarounds were expected to strain Group II supplies further. This has led suppliers to increase their offer levels, but buyers have partly resisted the steeper prices, with numbers moving up by moderate amounts between $10 per metric ton and $20/t, depending on the grade.

Some refiners prefer to increase distillates production if base oil margins are not deemed attractive enough, and this allows them to maintain base oils inventories in check as well as provide support to higher price indications.

A recent unplanned production issue at a Group II base oil plant in South Korea also contributed to a tightening of regional supplies; the producer has curbed operating rates due to feedstock supply shortages caused by upstream maintenance work at the associated refinery.

An upcoming turnaround at the sole Taiwanese Group II producer’s base oil plant in October meant that the supplier has been building inventories ahead of the shutdown and has limited spot offers.

Growing availability of Group III grades, not only from Asia, but from the Middle East as well, continued to place downward pressure on pricing, with numbers edging down by $10/t to $20/t week on week.

Several South Korean shipments have been discussed for export this week, with about 5,000 metric tons expected to be shipped from Yeosu to Southeast Asia in late August. About 2,000 tons were also mentioned for shipment from Yeosu to Rugao, China, in mid-August. A 1,000-ton cargo was quoted for lifting in Onsan to Zhanjiagang, China, in late August as well. A 1,600-ton lot was also on the table for lifting in Onsan to Taichung, Taiwan, in mid to late August. A cargo of under 1,000 tons was mentioned for shipment from Onsan to Wakayama, Japan, in mid-August.

In China, the government’s efforts to support economic growth – which has been less robust than anticipated following the lifting of stringent COVID policies – were not deemed effective enough to strengthen segments such as real estate development, one of China’s largest economic drivers.

Economic uncertainties and lackluster consumer demand were impacting the base oils and lubricants industries as well, as lubricant manufacturers felt guarded regarding demand for finished products in the coming months, particularly in the automotive and industrial segments, and did not want to commit to keeping high inventories. In some cases, Chinese players have explored the possibility of exporting extra cargoes to destinations such as India, and a distributor was also heard to be contemplating exports to the United States.

The start-up of a new Chinese Group III facility has been delayed and was now anticipated to occur in late August, while some other base oil units were undergoing maintenance and the shutdowns have been extended, or some plants were running at reduced rates due to weak product uptake.

The different market trends seen throughout Asia were also reflected in the key market India, where prices were deemed stable-to-firm. A clearer price picture was expected to emerge next month, when the monsoon season comes to an end and market activity, along with demand, were expected to pick up.

While Group I prices seemed to be maintaining a steady course in India, Group II values have edged up on higher offers. Steeper crude oil and fuel prices were lending additional support to price ideas, although domestic suppliers have offered decreases to protect market share. Some refiners were able to offer competitive prices because they refine Russian crude oil, which is imported at a discount to crudes from other sources. Plentiful availability of Group III grades was exerting downward pressure on price ideas as suppliers tried to capture fresh business.

Market participants in the region were monitoring crude oil and feedstock prices as they have shown some volatility in recent days but continued to hover at steep levels compared to seven or eight weeks ago. The price for the benchmark Brent crude was near $75 per barrel in early June and has been hovering near $85 per barrel mark on output reductions in key oil-producing countries such as Saudi Arabia and Russia. However, lackluster economic indicators in China meant that oil demand from the largest crude importer might decline.

This week, crude oil futures were on a downward trajectory on concerns that disappointing growth in China and a potential further U.S. interest rate hike would lead to a reduction in fuel demand in the world’s two biggest economies.

On Aug. 17, Brent crude Octoberfutures were trading at $83.69 per barrel on the London-based ICE Futures Europe exchange, from $87.60/bbl on Aug. 10.

Dubai front month crude oil (Platts) financial futures for September settled at $83.55 per barrel on the CME on Aug. 16, from $87.68/bbl on Aug. 9.

Base oil spot price assessments were mixed in Asia, with some grades moving up, some staying at steady levels and some dipping. 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 stable-to-firm. The Group I solvent neutral 150 grade was assessed at $800/t-$830/t, and the SN500 was holding at $920/t-$960/t. Bright stock was hovering at $1,070/t-$1,110/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed up by $20/gal at $920/t-$960/t, and the 500N also edged up by $20/t to $960/t-$1,000/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $670/t-$710/t, and SN500 was also unchanged at $760/t-$800/t. Bright stock prices were holding at $830/t-870/t, FOB Asia.

The Group II 150N was assessed up by $10/t at $780/t-$820/t FOB Asia, while the 500N and 600N cuts also moved up by $10/t to $830/t-$870/t, FOB Asia.

In the Group III segment, prices of some grades slipped on increased availability and competitive pricing. It is interesting to note that Group III prices had been holding at steady levels for most of the year and only started to lose ground in June. The 4 centiSt was assessed down by $20/t at $1,410-$1,440/t, and the 6 cSt was lower by $20/t as well at $1,370/t-$1,410/t. The 8 cSt grade was holding at $1,060-1,100/t, 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.

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Historic and current base oil pricing data are available for purchase in Excel format.