Crude oil futures were impacted by these disruptions, as well as ongoing tensions in the Middle East. Oil prices rose more than 3% on Wednesday as a U.S. helicopter repelled a Houthi attack on a vessel over the weekend and the U.S. warned militants against further attacks in the Red Sea. OPEC reiterated its intention to curb oil production to support prices. Protests in Libya also shut down the Sharara oil field, which produces 300,000 barrels per day, according to CNBC.com. Futures rose further on Thursday over increased tensions around the Israel-Hamas war and a larger-than-expected drop in U.S. crude inventories.

On Thursday, Jan. 4, Brent March 2024 crude futures were trading at $79.08 per barrel on the London-based ICE Futures Europe exchange, from $78.61/bbl for February futures on Dec. 28.

Dubai front month crude oil (Platts) financial futures for February 2024 settled at $77.92 per barrel on the CME on Jan. 3, from $79.31/bbl for Jan. futures on Dec. 27.

With many participants still absent from their offices due to the New Year’s holidays, business was on the quiet side this week, with activity gradually expected to pick up over the next few days. Most buyers concluded the year with lean inventories to avoid paying taxes on idle stocks and were expected to return to the trading scene to replenish them over the next few weeks. But there was still a large question mark hanging over markets about whether macroeconomic factors would be impacting base oils and lubricants demand negatively in the new year as they did during most of 2023.

Chinese demand for imports was particularly of interest to regional suppliers, as requirements remained relatively soft last year given that the country’s recovery from stringent COVID-19 lockdowns was less robust than anticipated. There were still no concrete signs whether the situation would be different this year, but suppliers hoped that base oil consumption would see an uptick in China ahead of the Lunar New Year holidays which will be celebrated in early February.

Higher gasoil prices could also encourage domestic Chinese refiners to produce more fuels in detriment to base oil output, forcing consumers to turn to imports. This week, it was heard that a couple of cargoes, one of about 5,000 metric tons made up of four grades and a second parcel of 2,400 tons were shipped from Ulsan, South Korea, to Tianjin at the end of Dec.

In India, buyers were expected to secure limited fresh volumes as several import shipments were already scheduled to reach Indian shores this month. This week, there were a few discussions involving Spanish and Middle Eastern material for shipment to India. A 7,000-ton cargo was mentioned for shipment from Cartagena, Spain, to Mumbai in early January. About 8,000 tons to 10,000 tons were also on the table for loading in Ruwais, United Arab Emirates, to West Coast India in late January. A 3,000-ton lot was quoted for shipment from Pyongtaek, South Korea, to Mumbai in the second half of January.

Some buyers in India preferred to take more product from domestic suppliers under term contracts to avoid being exposed to price volatility. Additional capacity was expected to come on stream in India this year and over the next few years, particularly of API Group III base oils, which would reduce the country’s reliance on imports.

South Korean suppliers seemed to have kept busy during the week, with several possible shipments involving base oils being discussed, including a 3,800-ton cargo for lifting in Yeosu and Onsan to Koh Sichang, Thailand, in late January and a 1,500-ton parcel for shipment from Yeosu to Bangkok, Thailand, in the second half of January. A 3,200-ton cargo made up of five base oil grades was mentioned for lifting in Ulsan to Ho Chi Minh, Vietnam, Koh Sichang and Bangkok at the end of January. A 1,500-ton lot was expected to be shipped from Yeosu to Yokohama, Japan, the first week of March. A 1,000-ton parcel was discussed for lifting in Ulsan and delivery in Ho Chi Minh on Jan. 24.

There were a number of cargoes being discussed for shipment in Southeast Asia as well, with about 4,000 tons to 5,000 tons of five or six grades likely to be lifted in Malacca, Malaysia, to Port Klang, Malaysia, in early Jan. A 2,500-ton lot was also mentioned for shipment from Cilacap, Indonesia, to Singapore or Port Klang in late Jan. About 5,000 tons were also expected to be shipped from Yokohama and Nagoya, Japan, to Singapore at the end of January.

Group I pricing was expected to stay fairly stable as demand seemed to be outpacing supply in Asia, particularly when facilities experience planned and unplanned outages in the main Group I base oil producer countries in Southeast Asia. For example, a turnaround at a Group I plant in Thailand this month was expected to tighten regional supplies as it was likely to coincide with buyers trying to replenish stocks.

Group I prices have generally held their values compared to their Group II counterparts as fewer plants are still producing Group I grades and certain cuts such as bright stock are very difficult to replace in most applications. A couple of Group I units of producer Eneos were also shut down permanently in Japan over the last two years, which contributed to a regional tightening of these products.

Prices of Group II grades showed fluctuations throughout 2023 and remained exposed to factors such as turnarounds and changes in trade patterns in exporting countries. Numerous United States Group II cargoes typically make their way to India in the last quarter of the year, and 2023 was no exception. The ample availability of spot shipments from the U.S. was exacerbated when stricter import regulations in Mexico –

the U.S.’ biggest receiver of base oil exports – left some suppliers holding extra barrels and these sellers began to target countries such as India.

Group II availability also lengthened in Asia following the restart of Formosa Petrochemical’s Group II plant in Mailiao, Taiwan, in early December after the company completed a planned turnaround. Earlier in the year, in August, a turnaround at Hyundai Oilbank-Shell’s Group II plant in Seosan-si, South Korea, had similarly reduced spot supplies, but this situation was reversed once the plant came back on stream. Since these two units have had their turnarounds in the second half of 2023, regional Group II supplies were not expected to be affected by significant supply disruptions in the first half of the year as these units were not anticipated to undergo scheduled maintenance.

Group III base oil supplies were plentiful in Asia, but the situation may change as more Asian cargoes were expected to be transacted in the next few weeks, particularly if the Suez Canal shipment disruptions are prolonged and additional Asian products are secured to meet demand in destinations such as the Americas.

Additionally, a couple of upcoming plant turnarounds may tighten availability during the first quarter of the year. Petronas planned to start a two-month turnaround at its plant in Malacca, Malaysia, in January, and SK Enmove has also scheduled a one-month turnaround at its Group III plant in Ulsan, South Korea, in the first quarter. Both producers were expected to build inventories ahead of the shutdowns, limiting their ability to offer spot cargoes.

Base oil spot prices were assessed largely unchanged from the previous week on a lack of reported business as players evaluated market fundamentals. The price ranges portrayed below generally reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were stable from the previous week. The Group I solvent neutral 150 grade was heard at $870/t-$910/t, and the SN500 was assessed at $990/t-$1,020/t. Bright stock was steady at $1,180/t-$1,220/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were hovering at $960/t-$900/t, and the 500N was unchanged week on week at $1,000/t-$1,040/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $770/t-$810/t, and the SN500 at $880/t-$910/t. Bright stock prices were holding at $990/t-$1,030/t, FOB Asia.

The Group II 150N was unchanged from the previous week at $800/t-$840/t FOB Asia, and the 500N was also steady at $810/t-$840/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were assessed stable from the previous week. The 4 cSt was gauged at $1,190-$1,220/t, and the 6 cSt at $1,170/t-$1,210/t. The 8 cSt grade was steady at $930-$970/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.