Asian Group II spot prices slipped for the first time since the US-Iran war began in late February as regional supply availability rose and southeast Asian demand waned.
The Argus-assessed Asian Group II N150 and N500 fob export prices edged down by $10/t to $1,800/t in the week ending 22 May.
Regional base oil production rose from May given that Asian refineries secured alternative crude supplies. Lower feedstock values boosted refining margins for base oils and incentivised refiners to raise operating rates. Easing transportation fuel demand has further boosted the attractiveness of such a move.
A key South Korean base oil producer also resumed spot offers after completing a scheduled maintenance in early May.
Higher prices in Asia, combined with persistently sluggish demand in China and India, have also opened the arbitrage for sellers in those markets to export domestically produced volumes, or imported supplies that were previously purchased at lower prices. These cargoes are typically offered at a significant discount to spot volumes from South Korea, and mostly in smaller quantities for the southeast Asian market especially.
Regional demand is also shrinking as prices are deemed too high, particularly as spot availability rises with competitively priced arbitrage cargoes.
But the price weakness is tempered as a Group II refiner in southeast Asia continues to cut its term volumes. Other Group II producers are prioritising contractual obligations or diverting surplus bulk volumes to markets like Europe and the US as buying interest in southeast Asia eases.
