Quarterly Update on Global Base Oil Market
For the Quarter Ending March 2021
The Asian Base Oil market reported a healthy increment in prices during Q1 2021, amid tight supply and significant demand. In India, Base Oil prices climbed up during January-February 2021 due to consistent tight supply activities. Later in March, resumed plant functioning and improved supply capped the price acceleration. The prices in India improved from USD 605.6 per MT (January 2021) to USD 650.5 per MT (March 2021). Meanwhile other Asian countries like Singapore increased their Base Oil prices during February amid healthy demand from downstream sectors and insufficient supply. On the other hand, IOC, a renowned Base Oil manufacturer in India, proposed its refinery expansion from 300,000 barrels per day to 500,000 barrels per day crude oil. This plant expansion is proposed to be completed by 2024 and will improve the supply crisis of Base Oil in India.
The North American Base oil market faced supply fallout during Q1 2021. Winter storm during February and March forced multiple plants to face unplanned shutdowns, hence a severe shortage of Base Oil was observed across the region. These shutdowns remained in force till the end of Q1 2021 and halted the supply activities across the region which accelerated its price increase. Motiva, the largest base oil producer in the Americas announced maintenance shutdown of two key facilities - HollyFrontier and Calumet due to seasonal storms with additional downtime due to seasonal factors.
The European refineries faced slow recovery in output compared to other regions during January-February and hence the supply of Base Oil remained tight. Though the vaccine rollout enhanced the market sentiments and industrial activities saw improvement, shipment shortages halted the trade activities across the region. In addition, key market players anticipated healthy revival from COVID 19 and recovery in refining activities in forthcoming months, hence they are expecting healthy supply of Base Oil in the future.
For the Quarter Ending September 2020
Base Oil demand was stagnant due to weaker automobile growth in the North east and South East Asian countries. As the downstream automotive sector continued to perform lackluster, overall demand in Asia remained stagnant under gloomy economic conditions. Supply from South Korea remained constant as there were no major turnarounds in the country. However, imports from the Middle East remained restricted due to resumption of operations at lower refineries in China, which created ample product availability at competitive prices. Business activities which showed marked recovery during Q3 amid the news of vaccine roll-out by Q4 have created a positive sentiment in the regional market. This, backed by better prospects for crude oil helped producers in pushing pricing curve upwards. Base Oil Grade II H-100 was assessed at USD 525 per tonne, while Grade II H-70 was priced around USD 670 per tonne on CFR India basis.
Despite reduced refinery run rate, light viscosity Group I oil supply was sufficient for the contract customers. The Group II Base Oil demand was especially strong in export market during Q3 largely from emerging nations such as India and Brazil. Group III supply was comfortable while suppliers were more focused on contract manufacturers created a tighter supply for spot buyers throughout the quarter. US base oil export prices gained unusually compared to the US domestic rates.
Following severe drop in the demand in Q2, amidst stalling automotive industry, a substantial recovery in the product demand was observed at the beginning of Q3. Though Group II demand was flat for most of the quarter, the demand of other base stock saw a firmed demand. Supply in September was tighter due to shortage in import from North America as an after of Hurricanes in the Gulf Coast. The demand for heavier grades was on a higher side compared to lighter grades. Output was increased by some blending units, as import disruption and maintenance is curbed by domestic supply to keep the market supported.