Some buyers were still holding back on purchases because they were uncertain whether downstream lubricant segments would perform well during the upcoming spring season. Demand for base oils traditionally picks up as lubricant manufacturers ramp up production rates, but this is far from a typical year, sources commented. The ongoing coronavirus pandemic and the surge in Omicron infections has wreaked havoc on business patterns and consumer habits.

Even car manufacturers have had to alter production plans due to supply chain disruptions and a shortage of automotive components such as microprocessors, and lubricant consumption has therefore been affected by both manufacturing rates and car sales.

Automotive sales have slumped in many countries, with India, for example, showing some month-to-month improvement, but sales in general a long way from full recovery to pre-pandemic levels. The country’s largest carmaker, Maruti Suzuki India Ltd., reported a 7% drop in its domestic passenger car deliveries to the dealers, The Economic Times reported. Total domestic sales – including passenger vehicles and light commercial vehicles – for Maruti Suzuki stood at 132,461 units in January 2022, compared to 142,604 units in the same period last year.

Base oil demand in India has held fairly steady, particularly for the light grades, but plentiful domestic production levels, together with a large number of shipments expected to arrive from the United States, the Middle East and Northeast and Southeast Asia have tempered the current buying interest as many consumers have met their product requirements for the time being.

Details about a number of base oil shipments headed to India emerged this week, with a 6,000-metric ton cargo expected to be shipped from Al Ruwais, United Arab Emirates, to India in the second half of February and a 12,000 metric tons of three base oil grades discussed for shipment from Yanbu, Saudi Arabia, to Karachi, Pakistan, and Mumbai, India, this month. A 6,000-metric ton parcel was on the table to be shipped from Ulsan, South Korea, to Mumbai in mid-February.

In Japan, car sales continued to slip, local media outlets reported. Sales of new vehicles fell in January for the seventh straight month, as automakers cut domestic production due to the impact of the Omicron variant. Industry groups said on Tuesday that nearly 330,000 units were sold, down by 14.2 percent from a year earlier, NHK Japan reported.

Consumption of fuel, lubricants and refined products in general have declined in Japan for the last few years, leading to the rationalization of Japanese refineries. The latest to be scheduled for permanent closure are two Eneos refineries – one in Negishi in October 2022 and the Wakayama refinery in 2023. The Negishi base oils plant has a nameplate capacity of 229,000 metric tons per year of API Group I stocks, and the Wakayama base oil plant can produce 360,000 t/y of Group I base oils, according to Lubes’n’Greases’ Base Stock Plant Data.

Aside from diminishing domestic demand, Group I base oils continue to be replaced by Group II and Group III base stocks in many applications worldwide. In recent years, Japan increasingly imported more high-performance grades, with large regular shipments arriving from South Korea, Singapore and other sources.

While buying appetite for Group I has declined in Asia in recent weeks, exerting downward pressure particularly on the heavy-viscosity grades such as the solvent neutral 500 and bright stock as requirements for heavy grades weaken during the winter months, there has been revived interest in Group II light viscosity grades, leading to increased bids and offers for the 150 neutral cut in particular.

The Group II grades had been anticipated to be plentiful during the first quarter, but an unexpected incident at the sole Group II plant in Taiwan may result in reduced availability from the producer for at least a month. According to reports, a fire at the Formosa Petrochemical refinery in Mailiao on Jan. 21 may force the producer to cut back base oil production. The refiner was heard to have cancelled exports of several gasoil cargoes in February.

A couple of planned turnarounds in the second quarter may lead to a further tightening of supplies. It was heard that GS Caltex was expected to have a turnaround at its plant in Yeosu, South Korea, starting in April. The unit can produce 1.2 million metric tons per year of Group II base oils and 146,000 t/y of Group III grades. Also in Korea, the Hyundai Oilbank-Shell base oils plant in Seosan-si (Daesan), which can produce 1.3 million t/y of Group II base oils, would be shut down in April for a maintenance program. A Group III unit in Southeast Asia may be marginally impacted by a turnaround at the refinery which supplies it with feedstocks for base oil production this month. The turnaround schedule has not been confirmed by the producers directly.

Prices for the Group III grades stayed within fairly unchanged price ranges over the last few weeks, although the 8 centiStoke appeared to be exposed to downward pressure as it was more widely available.

Spot base oil prices in Asia were assessed as generally stable, given subdued trade this week during the Lunar New Year holidays and what many considered a transitional period ahead of the spring production season. A few assessments were up on higher bids and offers. The spreads portrayed below reflect discussions, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were assessed as stable to soft. The Group I solvent neutral 150 grade was steady at $840/t-$870/t, and the SN500 was also stable at $1,010/t-$1,050/t. Bright stock was unchanged at $1,160/t-$1,200/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were stable at $870/t-$910/t and the 500N at $1,070/t-$1,110/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was higher by $20/t at $750/t-$790/t, and the SN500 was unchanged at $890/t-$930/t. Bright stock was also steady at $890/t-930/t, FOB Asia.

The Group II 150N edged up by $20/t to $800/t-$840/t FOB Asia, and the 500N and 600N cuts were steady at $850/t-$890/t, FOB Asia.

In the Group III segment, prices were steady. The 4 centiStoke was assessed at $1,420-$1,460/t, and the 6 cSt was hovering at $1,400/t-$1,440/t. The 8 cSt grade was heard at $1,160-1,200/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures were lower in mid-morning trade on Thursday in Asia after the OPEC+ agreed to keep output increases at previously agreed levels, while oil trading volumes were thin.

On Feb. 3, Brent April futures were trading at $88.74 per barrel on the London-based ICE Futures Europe exchange, from $89.61/bbl for March futures on Jan. 27.

Dubai front month crude oil (Platts) financial futures for March settled at $85.97/bbl on the CME on Feb. 2, from $86.83/bbl for Feb. futures on Jan. 26 (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)

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.

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