South Korean refiner Hyundai and Shell Base Oil (HSB) has agreed a contract to supply Group II base oils to a global trading firm.
The term contract to supply more than 35,000 t/yr of Group II mid- and high-viscosity grades from 2023 will be linked to Argus' Group II fob Asia published prices.
The HSB supplies are likely to be shipped from the port of Daesan to markets such as Europe and the Americas.
Base oil values in Asia have eased relative to crude and diesel in recent weeks partly because of firm oil upstream values. Rising surplus supplies have also put pressure on outright prices for some products.
Demand has been slower in some markets as Covid-19 lockdowns and other measures to control Covid-19 outbreaks in China has had a domino effect knocking base oil demand across Asia. There is growing uncertainty among buyers because of signs of a global economic recession and rising expectations for higher interest rates.
Many buyers have also held back because of expectations that prices in 2023 will correct lower from levels that reflect more the extreme tightness earlier in 2021. But buyers may start to adjust this strategy if it becomes clear that the prospect of a surge in supplies is less likely, especially for Group II base oils, and that there is less prospect of a more significant price correction for these supplies.
