Brent crude January 2024 futures were trading at $80.39 per barrel on the London-based ICE Futures Europe exchange on Nov. 9, from $85.36/bbl on Nov. 2.

Dubai front month crude oil (Platts) financial futures for December settled at $79.87 per barrel on the CME on Nov. 8, from $84.34/bbl on Nov. 1.

Given current upstream conditions and more attractive Group II base oil margins compared to competing fuel values, refiners might opt for maintaining or increasing base oil production rates instead of gasoil output, although demand for this fuel has been healthy in most countries too.

Higher base oil production levels would likely lead to oversupply conditions as demand tends to weaken towards the end of the year, when buyers prefer to lower inventories to avoid tax repercussions. Ongoing tensions in the Middle East on the back of the Israel-Hamas conflict and looming economic uncertainties also dampened consumption levels in most Asian countries.

The slowdown in demand was partly offset by recent and current plant shutdowns in the region. In Japan, Eneos was heard to have shuttered its Group I plant in Wakayama permanently, while the producer was also completing maintenance at its Mizushima A Group I plant. The maintenance program started in September and was anticipated to be completed this month.

Group II availability has been reduced by a two-month turnaround at Formosa Petrochemical’s Mailiao plant in Taiwan, which started in late October. There were also unplanned shutdowns reported at a couple of Chinese Group II plants. A Malaysian Group II and Group III producer was expected to start building inventories ahead of an extended turnaround in January, limiting its spot availability.

While base oil demand had generally started to slow down in the region in late October, India seemed to be an exception, because robust economic growth rates and healthy demand ahead of the Diwali festival starting on Nov. 12 had resulted in a base oil and lubricant consumption uptick. However, most business activities were expected to be halted during the five-day celebrations. Diwali is also celebrated in Singapore and other Southeast Asian countries, where trading was also anticipated to be muted next week.

Base oil prices had edged up during the weeks leading up to the Diwali holiday, and this had helped buoy prices in the region, but they were steady in India this week, as buying appetite has started to dwindle, and there were expectations of competitive import cargoes hitting the market in the coming weeks, according to reports.

Most buyers in India have been striving to meet base oil demand by taking domestic products under contract, but there has been heightened discussions about imports as well, with a few shipments offered out of South Korea, the United States and the Middle East. A 3,000-ton to 4,000-ton cargo was discussed for shipment from Daesan and Pyongtaek, South Korea, to West Coast India during Nov. 21 to Dec. 10. An 8,000-ton to 9,000-ton parcel was on the table for shipment from Onsan, South Korea, to Mumbai at the end of November. There was talk about an 8,200-metric ton cargo loading in Yanbu, Saudi Arabia, for West Coast India in mid to late November.

U.S. availability of spot cargoes was expected to increase as shipments to Mexico – the largest export market for U.S. base oils – have been thwarted by new import regulations. U.S. sellers may be looking for alternative outlets for their spot export barrels while they wait for the required licenses to be processed by the Mexican government. The possibility of securing additional spot supplies has placed downward pressure on Indian CFR price expectations, particularly for Group II cargoes as these are the main products exported from the U.S.

Group I base oils were able to maintain more of a premium as supplies from Southeast Asia were still tight, while Group III exports from South Korea were deemed plentiful and prices have come under pressure, particularly for offers into China, where demand appeared to be languishing.

Demand for most grades in China remained lackluster and importers have lowered their offer levels to entice buyers. Bright stock is usually a much sought-after grade, but requirements have dwindled on account of the approach of winter, when this base oil is not in high demand. Additionally, some Thai bright stock cargoes were expected to arrive in China, easing any supply tightness.

Group II supply was heard to be lengthening in China due to recently increased domestic output. The country usually imports large quantities of Group II grades from Taiwan, but Formosa’s turnaround has restricted exports from the producer. Group III supplies were also more than adequate to fulfill demand levels, as a domestic producer has started up a new plant and has been able to meet the required specifications, according to sources.

The perception that supply was plentiful, and demand would be gradually declining has taken some of the pressure off Chinese buyers, who preferred to consider several offers before committing to any purchases. Domestic suppliers were heard to have lowered prices to encourage consumers to secure their products instead of imports.

Base oil spot price assessments were steady to lower in Asia, depending on the factors impacting each of the different base oil segments. 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 hovering at $840/t-$880/t, and the SN500 was heard at $990/t-$1,020/t. Bright stock was assessed at $1,220/t-$1,260/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were holding at $1,010/t-$1,040/t and the 500N was stable at $1,050/t-$1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $790/t-$830/t, and the SN500 was hovering at $890/t-$920/t. Bright stock prices were gauged at $1,010/t-1,050/t, FOB Asia and were exposed to downward pressure due to softening demand.

The Group II 150N was steady at $900/t-$930/t FOB Asia, and the 500N was also unchanged at $930/t-$960/t, FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were assessed lower this week. The 4 cSt was assessed down by $20/t at $1,270-$1,300/t, and the 6 cSt was also lower by $20/t at $1,240/t-$1,280/t. The 8 cSt grade edged down by $30/t to $960-$1,000/t. 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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