On Nov. 22, Brent January 2024 crude futures were trading at $81.96 per barrel on the London-based ICE Futures Europe exchange, from $78.48/bbl on Nov. 16. (Prices were assessed on Nov. 22 due to the U.S. Thanksgiving holiday on Nov. 23).

Dubai front month crude oil (Platts) financial futures for December settled at $82.47 per barrel on the CME on Nov. 22, from $81.13/bbl on Nov. 15.

Base oil demand generally tends to soften during the last few weeks of the year as participants opt for keeping low inventories to avoid tax assessments on supply overhang. This year, this tendency has been exacerbated by economic uncertainties, geopolitical tensions, and volatility in crude oil and feedstock pricing. Prospects regarding lubricant demand in the first few months of the year remained murky, making blenders even more wary about securing too much product and leading some consumers to reduce volumes taken under term contract next year.

Prices were exposed to downward pressure as crude oil and gasoil prices have plummeted from the steep levels seen in September. Most segments of the market experienced downward price adjustments this week, with the exception of the API Group I grades, which remained in short supply amid healthy demand.

Robust domestic demand in Group I producer countries in Southeast Asia and Japan coming from the industrial, agricultural, heavy-duty automotive and marine sectors meant that suppliers had more limited availability for spot export transactions. There was also emerging demand from the Philippines and Vietnam. As a result, the few barrels that were on offer saw upward price adjustments.

A number of recent and ongoing shutdowns also impacted Group I availability in the region. Japanese refiner Eneos decommissioned 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 mid to late November. Group I exports from Japan have therefore been reduced, and the country has also had to import cargoes to cover domestic demand.

Group II and Group III base oils, on the other hand, appeared plentiful in the region as most production plants were running well, demand remained lukewarm, and buyers were hoping to achieve lower pricing as a result. One exception was the Taiwanese producer Formosa Petrochemical, whose Mailiao Group II plant was completing a two-month turnaround that started in late October. A Malaysian Group II and Group III producer was also expected to start building inventories ahead of an extended turnaround in January, limiting its spot availability too.

While Group II suppliers were aware that availability would lengthen in December, once Formosa restarted its plant, they were trying to keep offers firm, despite pressure from buyers to lower numbers. Refiners could also resort to curbing base oil production rates to avoid a hefty product overhang and falling indications in coming weeks. Group III facilities were running well and there have been additional cargoes available from the Middle East.

In one of the region’s largest markets, China, demand for imports has been lackluster as domestic output appeared to be sufficient to meet most requirements, although a chronic deficit of the heavier grades led to a number of import transactions, particularly of Group I bright stock. Even so, importers were conservative in terms of how much product to secure as prices might be impacted by fluctuations in crude oil numbers and they wanted to avoid holding high-priced inventories. There were also uncertainties riddling the downstream lubricant market and it was not clear whether demand would be improving in the coming months.

There were discussions involving several import cargoes to be shipped to China in December, including a 3,800-metric ton lot for lifting in Onsan, South Korea, to Tianjin at the end of December. A 6,000-ton cargo was on the table for shipment from Onsan to Huizhou in mid-December. A 3,750-4,000-ton parcel was expected to be shipped from Thailand to China in the second half of December. About 11,000 tons were mentioned for shipment from Daesan, South Korea, to Tianjin the first week of December.

Demand for Group III grades has also weakened in China and Group III producers have trimmed run rates accordingly, helping keep prices from falling. Group II prices, on the other hand, were under pressure as domestic producers have completed turnarounds and production rates were fairly high.

In India, demand had seen an uptick ahead of the Diwali holidays which started on Nov. 12, but activity was subdued during the week’s celebrations, and it was still fairly muted as participants gradually returned to business. The approach of the end of the year did not help matters as buyers typically prefer to order just enough volumes to keep day-to-day operations running. At the same time, this is a good time of the year to secure attractive pricing as suppliers try to lower inventories. This was particularly evident on the import side, as several cargoes involving United States, Middle Eastern and Northeast Asian products were being discussed.

Just like in other nations in Asia, India enjoyed plentiful supplies of Group II and Group III grades, but a shortage of Group I offers. Local plants were running well, and most buyers preferred to secure volumes domestically, rather than risk purchasing cargoes that may have lost value upon arrival. Imported Group II cargoes were expected to arrive over the next few weeks, quenching some of the thirst for these grades. Looking forward, a 6,000-metric ton parcel was expected to be shipped from Singapore to Mumbai in late November. About 8,000 tons were expected to be moved from the Red Sea to the West Coast of India at the end of November. A little over 3,000 metric tons were quoted for shipment from Ulsan, South Korea, to Mumbai in the first half of December. A 5,000-ton lot was discussed for shipment from Antwerp, Belgium, to Mumbai in mid-December. About 3,000 tons were mentioned for shipment from Ulsan to Mumbai in the first half of December.

Base oil spot price assessments were mixed in Asia this week, with prices for some grades declining, some remaining unchanged and others edging up. Even though demand for Group I was healthy, bright stock prices were either unchanged or slipped because of a seasonal drop in demand. 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 mixed compared to the previous week. The Group I solvent neutral 150 grade inched up by $10/t to $850/t-$890/t, and the SN500 was assessed steady at $990/t-$1,020/t. Bright stock fell by $20/t to $1,200/t-$1,240/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 also steady at $1,040/t-$1,080/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was slightly up by $10/t at $800/t-$840/t, and the SN500 was also up by $10/t at $900/t-$930/t. Bright stock prices were holding at $1,010/t-$1,050/t, FOB Asia.

The Group II 150N was lower by $10/t at $880/t-$910/t FOB Asia, and the 500N also slipped by $10/t to $900/t-$930/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 $1,250-$1,280/t, and the 6 cSt was also lower by $10/t at $1,220/t-$1,260/t. The 8 cSt grade inched down by $10/t as well to $940-$980/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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