While activity in China mostly halted this week due to the week-long celebration of the National Day holidays, several base oil cargoes came up in shipbrokers’ discussions, with a 1,600-metric ton parcel made up of two base oil grades mentioned for shipment from Onsan, South Korea, to Tianjin in late October to early November. A second similar cargo was expected to be shipped from Ulsan, South Korea, to Tianjin in mid-October. A 1,500-ton lot was also on the table for lifting in Onsan and delivery in Zhenjiang in late October.

There was also subdued activity in South Korea because of the Chuseok and National Foundation Day holidays between Sept. 28 and Oct. 3. Aside from the cargoes going to China mentioned above, a few other South Korean base oil parcels have been lined up for shipment, with 5,000 tons expected to make their way from Yeosu, South Korea, to Hamriyah, United Arab Emirates, in late October. A 1,000-ton cargo was mentioned for shipment from Ulsan to Keelung, Taiwan, in mid-November. Several cargoes were also on the table for possible shipment to India.

A 7,000-ton cargo made up of three grades was anticipated to be shipped from Ulsan to Mumbai and Jawaharlal Nehru Port Trust, India, in the last week of October. A 4,000-ton parcel of three grades was also mentioned for lifting in Malacca, Malaysia, to Chennai in late October. An 8,000-ton combination cargo of base oils and aniline was discussed for shipment from the U.S. Gulf to Kandla in second half October.

Supply in Asia has tightened on the back of a number of recent, ongoing and imminent turnarounds and refineries trimming base oil output in favor of distillates as margins were more attractive. However, the higher base oil values seen in recent weeks meant that base oil premiums over gasoil were improving, reducing refiners’ impetus to produce more gasoil and less base oil.

In Japan, base oil production has steadily declined since the beginning of the year and was hovering at its lowest levels in August and September, according to reports. This may have to do with the fact that domestic demand for industrial lubricants has been on a downward trend for years, although automotive lubricants demand was still robust. There has also been a concerted effort on the part of the government to encourage the shutdown of refineries that are not environmentally friendly. Base oil producers have either adjusted run rates, shut down plants for maintenance, or idled production permanently. There have also been some unexpected events such as a recent refinery fire that caused production to be halted.

Japanese producer Eneos was expected to have started an extended three-month maintenance program at its Mizushima-A API Group I plant and intended to idle its Group I Wakayama refinery – which houses a Group I plant – permanently this month as part of a long-term restructuring plan to adjust to falling domestic fuel demand and growing global competition.

Spot cargoes have also become less available from Taiwan, as the sole Taiwanese producer of Group II base oils, Formosa Petrochemical, was preparing for a two-month turnaround, starting in mid-October. The producer was reported to have built inventories to cover domestic term obligations during the outage but expected to have suspended most spot exports.

At the same time, the completion of maintenance at South Korean plants earlier this year meant that more product was coming into the market in that country, allowing producers to up their export volumes, with Group II and Group III offers anticipated to multiply in the coming weeks.

Group I availability from Southeast Asia remained tight and as a result, prices were exposed to upward pressure. Producers in Thailand and Indonesia were doing their utmost to meet domestic demand and also offer Group I grades for export transactions, but supplies were limited. However, demand might be losing steam if economic uncertainties start to affect base oil and lubricants consumption in the region more noticeably. Additionally, both buyers and suppliers prefer to reduce inventories ahead of the end of the year to avoid tax repercussions, and this was likely to dampen buying interest in the last quarter.

Still, Group I prices were heard to be exposed to upward pressure in India, where base oil and lubricant demand has seen an uptick as the monsoon season ended and industrial output, the population’s mobility and accompanying oil changes were expected to rise, particularly for heavy-duty vehicles. Agricultural activity has been hampered by a lack of rain in certain areas of India, while others received above-average rainfall, but demand from this sector was also anticipated to firm. Demand also typically rises ahead of the Diwali holidays celebrated in mid-November.

Meanwhile, Group II and Group III offers have also risen, but Indian buyers were resisting the steeper levels as domestic supplies were plentiful and there were expectations that new domestic Group III capacity would come online in India in the coming weeks.

Base oil spot price assessments were steady to firm in Asia this week, with prices for a number of grades moving up and others remaining unchanged. The price ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were steady-to-higher from the previous week. The Group I solvent neutral 150 grade was unchanged at $820/t-$860/t, and the SN500 was at $940/t-$980/t. Bright stock edged up by $10/t to $1,130/t-$1,170/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed up by $10/t at the low end of the range at $1,000/t-$1,030/t and the 500N was steady at $1,050/t-$1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was stable this week at $740/t-$780/t, and the SN500 climbed by $10/t at the low end of the range to $880/t-$910/t. Bright stock prices were also higher by $10/t at the bottom end of the range at $970/t-1,000/t, FOB Asia on limited availability.

The Group II 150N edged up by $10/t at the low end of the range to $890/t-$920/t FOB Asia, and the 500N was also higher by $10/t at the low end of the spread at $920/t-$950/t, FOB Asia, with business reported concluded at the high end of the range.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were steady, despite some lingering downward pressure on account of ample availability. The 4 cSt was assessed at $1,320-$1,350/t, and the 6 cSt was heard at $1,290/t-$1,330/t. The 8 cSt grade was gauged at $1,030-1,070/t, amid thin discussions and plentiful supply. All indications are FOB Asia for fully approved product.

Upstream, crude oil futures plummeted on Wednesday on lower fuel demand in the U.S. and a bleaker global macroeconomic picture, which was expected to result in reduced oil demand. Both U.S. West Texas Intermediate and Brent futures fell by more than $5 per barrel on Oct. 4.

Brent crude December futures were trading at $84.29 per barrel on the London-based ICE Futures Europe exchange on Oct. 5, from $96.96/bbl for November futures on Sept. 28.

Dubai front month crude oil (Platts) financial futures for November settled at $84.37 per barrel on the CME on Oct. 4, from $94.98/bbl for October futures on Sept. 27.

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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

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