The spring season has been slightly disappointing so far, with demand levels deemed lower than at the same time in years past. Producers remained hopeful that as the weather improved in many areas, so would lubricant sales.
Sources said that economic uncertainties and the likelihood of a worldwide slowdown in demand of consumer goods – including cars – was having an effect on base oils and finished lubricant requirements. Base oil demand was reported as fairly steady, but not particularly robust as is typical in the spring.
One factor that may be influencing purchase patterns is the ample availability of most grades. Sources said that buyers did not appear pressured to commit to volumes because they expected to be able to negotiate pricing as there was competitive activity among suppliers.
Import activity in countries such as China was mostly focused on contractual business, with fewer spot cargoes expected to be concluded as importers tried to avoid the risk of purchasing too much product and holding high inventories. There continued to be regular shipments from South Korea and Taiwan, and an increasing number of cargoes from the Middle East.
There has also been keen buying interest noted in Vietnam, with a number of base oil parcels heard to be making their way from Singapore and South Korea.
Several base stock cargoes were also heard to have been loaded in Texas and Mississippi, in the United States, for delivery to India. Some shipments from U.S. Gulf Coast refineries have suffered delays because of the closure of the Houston Ship Channel due to a chemical spill from the Intercontinental Terminals Co., which occurred at the end of March. However, vessel movements were heard to be gradually returning back to normal.
While Asian producers were focusing on trying to improve margins in the face of increased cost pressure from climbing crude oil and feedstock prices, there was resistance to higher offers. Some of the spot price ranges portrayed below have been notionally revised up to reflect discussion levels, but business was still taking place close to the low end of the spreads, according to reports. Prices have been moving up in other regions as well, offering support to higher price ideas in Asia, sources added.
Ex-tank Singapore Group I prices for the solvent neutral 150 grade were stable at $750-$770/t per metric ton, while SN500 was assessed at $760/t-$800/t. Bright stock was unchanged at $880/t-$900/t, all ex-tank Singapore.
Group II 150 neutral was heard at $750/t-$790/t, while the 500N was steady at $770/t-$810/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 moved up by $10/t to $650/t-$680/t, and the SN500 grade was also up by $10/t at $630/t-$650/t. Bright stock was hovering at $780/t-$800/t, FOB Asia.
Group II 150N was assessed up by $10/t at $620/t-$640/t FOB Asia, while the 500N and 600N cuts were also up by $10/t at $630/t-$650/t, FOB Asia on steeper bid and offer levels.
In the Group III segment, the 4 centiStoke grade was slightly up by $5/t at $830-$870/t and the 6 cSt was also up by $5/t at the low end of the range at $840/t-$885/t. The 8 cSt grade was assessed up by $10/t at $730/t-$760/t, FOB Asia for fully-approved product.
In market related news, growing attention seems to be focusing on the new marine fuel requirements that the International Maritime Organization will start to impose as of Jan. 1, 2020. The marine fuels need to comply with the IMOs sulphur content cap of 0.5 percent, down from the current 3.5 percent.
Some shipping companies may opt for installing exhaust gas cleaning systems (scrubbers) that will allow them to continue using the higher sulphur-content fuels. Scrubbers have proved of particular interest to owners of large vessels such as very large crude carriers (VLCCs) in the tanker sector, cape size bulkers, and ultra-large containerships given the relative cost of the exhaust cleaning units and the potential savings from the price spread between high sulphur and low sulphur marine fuels come 2020, Seatrade Maritime News reported back in August 2018.
Earlier this week, the Maritime and Port Authority of Singapore published on its website a list of 49 licensed bunker suppliers that will provide compliant fuels in Singapore.
These suppliers offer IMO2020-compliant fuels such as 0.5 percent sulphur marine gasoil, 0.5 percent low-sulphur fuel oil and 0.1 percent ultra-LSFO, or will do so by the first quarter of 2020.
Market sources said these changes will not only have an impact on marine lubricant production because of new engine demands, but also because refiners may opt for streaming more feedstocks into the production of MGO instead of base oils as it may offer better profits.
There is a huge demand for MGO at the moment (and the price of MGO is getting higher by the day) and I see a lot of refiners starting to move molecules to the MGO pool at the expense of light base oils, a market source commented.
Upstream, crude oil futures slipped on Thursday, but continued to hover near five-month highs as global supply was bound to tighten on OPEC production cuts, U.S. sanctions on Iranian exports, and continuing output disruptions and power blackouts in Venezuela.
Brent June futures were trading at $70.63 per barrel on the London-based ICE Futures Europe exchange on April 11, up from $69.92 on April 4.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.