Brent crude December futures were trading at $86.64 per barrel on the London-based ICE Futures Europe exchange on Oct. 12, from $84.29/bbl on Oct. 5.

Dubai front month crude oil (Platts) financial futures for November settled at $85.11 per barrel on the CME on Oct. 11, from $84.37/bbl on Oct. 4.

After an extended upward trek since late July, crude values had plummeted last week on pessimistic economic prospects for major economies, despite efforts by Russia and Saudi Arabia to prop prices up through production cuts. The sudden spike in values following the attack on Israel made base oil participants sit up and pay attention.

A tightening supply and demand balance, together with steep crude oil and feedstock prices, had already resulted in base oil spot values moving up since late August, and buyers were concerned about potential additional increases.

Base oil producers in Asia had also made concerted efforts to lift base oil prices in order to compete with high gasoil values and justify base oil production versus distillates output. A few refiners had already curbed base oil run rates in favor of distillates, but this scenario may change, depending on what happens on the crude oil and feedstocks side over the next few weeks.

Despite initial buyer resistance, the higher base oil price indications had by and large been accepted because many buyers had depleted stocks and needed to replenish them, particularly in places like India, where consumers had been waiting for the monsoons to be over and for industrial and automotive activity to pick up.

However, once these buyers have secured product for the next several weeks,  demand may slow down as blenders try to finish the year with just enough inventories to run daily operations.

Buyers in India sometimes are able to take advantage of competitive offers from producers who are trying to reduce inventories before the end of the year. API Group II cargoes originating in the U.S. are sometimes seen moving to India in the fourth quarter, although there have not been many transactions reported recently as the U.S. Group II segment appeared to be balanced-to-tight. Perhaps U.S. producers will not have any surplus cargoes to offer on the spot market at competitive levels or may not be under pressure to sell as there are opportunities to ship cargoes to destinations within closer range such as Brazil.

Tight supplies and healthy demand were placing upward pressure on Group I pricing in Asia, with a limited number of spot cargoes surfacing during the week. Producers in Thailand and Indonesia were prioritizing the fulfillment of requirements in their own countries before venturing out into the export market.

An extended turnaround at a Japanese Group I plant and the permanent shutdown of another unit this month have also contributed to the tightening of supplies.

At the same time, macroeconomic uncertainties and the start of the fourth quarter, when participants try to use up existing stocks and keep lean inventories to avoid year-end tax consequences, was dampening overall business.

There were still buying inquiries noted in China, where availability of the heavy-viscosity grades and bright stock is scarce due to a structural shortage of these grades. Buying appetite was moderate, but there have been some inquiries noted during the week, following week-long National Day holidays when the market was generally inactive last week.

The Chinese economy was moving along but has not reached the growth rates that had been anticipated when its strict COVID restrictions were dropped. As a result, most economic sectors were suffering under uncertain prospects, and the lubricants and base oil industries were no exception.

Group II supplies remained tight in Asia, particularly in Northeast Asia as the sole Taiwanese producer, Formosa Petrochemical, was expected to embark on a two-month turnaround this week. Formosa was reported to have built inventories to cover domestic term obligations during the outage but was expected to have suspended most spot exports. There was no direct confirmation from the producer regarding its turnaround schedule.

The Group III segment continued to show signs of lengthening, as supplies seemed to surpass demand in Asia, but the extra cargoes were heard to have been offered to Middle East countries. Several Group II and Group III cargoes were heard to have made their way from South- and Northeast Asia to the United Arab Emirates and Saudi Arabia in recent weeks, aside from the regular shipments concluded to the U.S., Europe and destinations in Asia.

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 from the previous week. The Group I solvent neutral 150 grade was unchanged at $820/t-$860/t, and the SN500 was hovering at $940/t-$980/t. Bright stock was unchanged at $1,130/t-$1,170/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were assessed 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 higher by $10/t at $750/t-$790/t, and the SN500 climbed by $10/t to $890/t-$920/t. Bright stock prices were also higher by $10/t at $980/t-1,010/t, FOB Asia on limited availability.

The Group II 150N was hovering at $890/t-$920/t FOB Asia, and the 500N was higher by $10/t at $930/t-$960/t, FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were steady. 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 unchanged week on week at $1,030-$1,070/t, amid subdued trade and adequate supply. All indications are FOB Asia for fully approved product.

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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