Asia Base Oil Price Report

While the number of new coronavirus infections in China has fallen, the dire situation is far from over, with the disease claiming hundreds of victims in Asia, Europe and the Americas and taking a significant toll on the world’s economy

In Singapore, the highest single-day jump in cases was seen on Thursday, while South Korea, which had been cautiously optimistic about a slowdown in infections, reported a new spike infections.

The implementation of fresh restrictions on businesses and the general population in most countries has led to a significant reduction of activity and demand for raw materials from a majority of industrial segments. Some exceptions may be those companies that manufacture products that serve the medical segment, or produce disinfectants, hand sanitizer and masks, which have been running plants at full rates.

Furthermore, due to the quarantines, lockdowns and border closings that have been imposed throughout the world, the need to leave home has dwindled, resulting in sharply reduced usage of public transportation, logistics services and airline capacity. All of the virus-related measures will likely lead to a major reduction in demand for automotive, marine and aviation fuels and lubricants, experts predicted.

Due to fewer petrochemical cargoes moving between the different regions over the last two months, freight rates have softened, and shipping companies have cut the number of vessels covering specific routes, too.

Additionally, port operations have been affected by a dearth of employees, particularly in China, and as a result, participants experienced greater difficulty in scheduling bookings for ocean freight. “What used to be a one or two-week wait is now a three to four-week lead time,” a market source noted.

A number of automakers, most of them located in North America, announced on Wednesday that they would suspend production until the end of March because of the outbreak. General Motors, Ford Motor Company and Fiat Chrysler Automobiles will be halting production for the remainder of the month to avoid the possibility that employees get infected and to sanitize their plants, media reports said.

In Germany, Volkswagen Group and BMW also announced they would be shutting down most production in Europe for four weeks due to the outbreak.

The automakers’ shutdowns will likely prompt a huge drop in factory fill oil demand and ultimately, in base oil consumption, market sources speculated.

Even if the coronavirus outbreak manages to be contained in China, demand for products will not be restored from one day to the next there, and there will be additional demand destruction in other countries that are dealing with the pandemic and would likely reduce Chinese imports.

At the same time, Chinese manufacturing plants have started to ramp up production rates as more employees can return to their workplaces and some travel restrictions have been lifted.

Several base oil plants were also increasing their production rates after trimming output, including Sinopec‘s Group I/II plant in Gaoqiao, while CNOOC Taizhou‘s Group II and naphthenic base oil plant was slated to start a one-month turnaround in mid-March.

The virus-induced turmoil and a price war between Saudi Arabia and Russia also caused crude oil prices to plummet to 18-year lows this week, with West Texas Intermediate briefly touching the $20 per barrel mark.

Futures edged up slightly on Thursday on hopes that economic stimulus measures announced by the European Union and the U.S. would help mitigate the impact of the Covid-19 pandemic.

On Thursday, March 19, Brent May futures were trading at $26.04 per barrel on the London-based ICE Futures Europe exchange, compared to $33.45/bbl on March 12 and $51.51/bbl on March 5.

Since market conditions remained highly volatile, and upstream values were on a downward trajectory, base oil prices remained under pressure. However, suppliers remained adamant that margins had been squeezed over a long period, and it was not possible to adjust prices down overnight. A couple of the spot ranges that appear below have been notionally revised down to reflect the softening trend for some of the grades, but most prices remained largely unchanged.

Ex-tank Singapore Group I prices for the solvent neutral 150 grade was slightly down at $640/t-$660/t, and the SN500 was also down by $10/t at $690/t-$710/t. Bright stock was unchanged at $810/t-$830/t, all ex-tank Singapore.

The Group II 150 neutral and 500N were also revised down by $10/t to $700/t-$720/t and $710/t-$730/t, respectively, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was holding at $530/t-$550/t, and the SN500 grade was adjusted down by $10/t at the low end of the prevailing range to $530/t-$550/t. Bright stock was steady at $690/t-$710/t, FOB Asia.

Group II 150N was holding at $550/t-$570/t FOB Asia, while the 500N and 600N cuts were steady at $580/t-$600/t, FOB Asia.

In the Group III segment, the 4 centiStoke was hovering at $750-$780/t and the 6cSt was heard at $760/t-$790/t. The 8 cSt grade was hovering at $720-740/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. 

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