On Nov. 16, Brent crude January 2024 futures were trading at $78.48 per barrel on the London-based ICE Futures Europe exchange, from $80.39/bbl on Nov. 9.

Dubai front month crude oil (Platts) financial futures for December settled at $81.13 per barrel on the CME on Nov. 15, from $79.87/bbl on Nov. 8.

There was some market attention focused on this week’s Asia-Pacific Economic Cooperation conference in San Francisco, U.S., and in particular, a meeting between U.S. President Joe Biden and China’s President Xi Jinping. While there were no strong expectations that the trade tensions between the two nations would be assuaged by the talks, Biden told reporters that the conversation had been the “most constructive and productive” between the two leaders in a while. According to The New York Times, Biden announced modest agreements to resume military communications and tried to persuade China to curb the country’s exports of fentanyl and the chemicals that can be combined to make the drug that has killed thousands of Americans. China also hoped to attract more foreign investors, as many firms have left the country in recent years. Taiwan remained the biggest point of contention between the two nations and no resolution was expected to be achieved during the meeting.

China has seen domestic base oil production flourish over the last few years as new plants have come on stream, with one producer starting up an API Group III plant in the third quarter of this year, although the supplier was heard to have reduced output levels due to feedstock supply issues this month. The new capacity has allowed China to be less dependent on base stock imports, with consumers being able to meet most requirements through the purchase of domestic products.

However, China has a deficit of the heavy grades, especially those in the Group I category, and it still needs to import heavy grades mainly from other countries in the region. Demand for the heavy grades has weakened due to seasonal patterns and substitution of Group I cuts with Group II grades. Despite lower demand, a number of import cargoes were discussed over the week, with a 2,300-metric ton expected to be shipped from Onsan, South Korea, to Huizhou in early November. and a 6,000-ton lot expected to cover the same route in December. A 1,000-ton lot was on the table for shipment from Onsan to Tianjin in late November. A 2,300-ton cargo was also anticipated to be shipped from Onsan to Jingjiang at the end of November. A 5,000-ton lot was mentioned for shipment from Singapore to China in first half of November. About 11,000 tons were being discussed for shipment from Daesan, South Korea, to Tianjin in early December as well.

In India, trading has been subdued during the week due to the celebration of Diwali, the Festival of Lights, which started on Nov. 12. Blenders had prepared for an uptick in demand ahead of the holiday and had procured increased volumes of base oils, driving spot prices up. However, demand was expected to weaken after the holiday as lubricant consumption tends to decline ahead of the end of the year. Fuel prices have also slipped, feeding consumers’ hopes of falling base oil values and prompting them to delay purchases.

India typically receives substantial amounts of Group II base oils from the U.S. and the Middle East during the last quarter of the year, when producers strive to reduce inventories by offering attractive pricing into export destinations. This year, however, U.S. producers have been able to keep inventories on the low side, and there were fewer cargoes on the market. Nevertheless, about 12,000 tons were anticipated to be shipped from the U.S. Gulf to Mumbai in the first half of November. A 2,000-ton lot was heard to have been lifted in Ruwais, United Arab Emirates, to Mumbai in early November. Over 18,000 tons were expected to be shipped from Jeddah and Yanbu, Saudi Arabia, to India in late November. A 5,350-ton cargo was quoted for shipment from Yanbu to Hazira, Mumbai and Karachi, Pakistan, in late November. Additionally, about 8,000 tons were mentioned for shipment from Onsan to Mumbai in late November, and a 6,000-ton lot was likely to make its way from Singapore to Mumbai at the end of November. In early December, a 2,590-ton cargo was likely to be shipped from Ulsan, South Korea, to Mumbai.

The recent fall in competing fuel values also meant that regional refiners would likely continue to run base oil plants at close to top rates, adding to the product overhang in the region. Some producers preferred to curb production rates to manage inventory levels. This was the case for many domestic producers in China.

Group I supply and demand were still deemed snug in Asia as production of Group I grades has been shuttered in recent years, with fewer plants remaining and most of them located in Southeast Asia and Japan. Domestic demand in those countries that still produce Group I has also been healthy, reducing export availability.

Japanese refiner Eneos was heard to have shuttered its Group I plant in Wakayama permanently in mid-October, while the producer was also completing maintenance at its Mizushima A Group I plant this month. The maintenance program started in September and was anticipated to be completed in November.

Group I supplies were expected to grow slightly in the coming weeks on declining demand as is typical at the end of the year. However, the Group I heavy grades that are used in industrial applications were also seeing steady consumption in some countries on healthy activity levels. Most suppliers have been able to keep inventories in check throughout the year, so the product overhang was not expected to be overwhelming in this segment, and prices were therefore more sheltered from downward pressure.

Group II availability has been reduced by a two-month turnaround at Formosa Petrochemical’s Mailiao plant in Taiwan, which started in late October. 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 as well.

Despite these events, supply of the Group II heavy-viscosity grades seemed to be lengthening, with prices coming under pressure as a result. Demand has started to slow down as both buyers and sellers prefer to end the year with just enough material to keep operations running, and consumption of the heavier grades also declines as end-users switch to lighter formulations during the colder winter months.

A similar situation applied to Group III grades, in that supplies have become more plentiful as most plants were running well and demand has been lackluster over the last several weeks, placing downward pressure on pricing.

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 to lower from the previous week. The Group I solvent neutral 150 grade was hovering at $840/t-$880/t, and the SN500 was assessed at $990/t-$1,020/t. Bright stock was heard 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, but the 500N edged down by $10/t to $1,040/t-$1,080/t, ex-tank Singapore.

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

The Group II 150N was lower by $10/t at $890/t-$920/t FOB Asia, and the 500N fell by $20/t to $910/t-$940/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 $10/t at $1,260-$1,290/t, and the 6 cSt was also lower by $10/t at $1,230/t-$1,270/t. The 8 cSt grade edged down by $10/t as well to $950-$990/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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