Despite healthy activity in the automotive and industrial segments, base oil demand in India has been more sluggish than anticipated after the year-end holidays, particularly as far as spot cargoes were concerned. Consumers seemed to be comfortable with current inventory levels and preferred to take as much product as possible under contract, especially from domestic suppliers, rather than having to deal with risky pricing and logistics.

There were also several import cargoes expected to arrive in India in February, and prices seemed to be holding steady. Suppliers appeared reluctant to cut prices as some base oil grades may become tighter in the coming weeks. Recent production issues at domestic facilities also supported pricing.

A few cargoes were being discussed for shipment to India, including a 10,000-metric ton lot which has been concluded for shipment from Houston in the United States to Mumbai in late January. Interestingly, a 5,000-ton to 6,000-ton lot was mentioned for lifting in Fortaleza, Brazil, to West Coast India in the first half of February.

In contrast to India, the Chinese automotive industry has not fared so well. Car sales in China have stagnated since hitting a peak of 24 million units in 2017, with last year’s sales falling to 21.7 million, a Bloomberg article explained. A Chinese car dealership that operated as many as 80 stores across the southern province of Guangdong went bankrupt last week – a sign the intense competition that has roiled the world’s biggest car market may extend into another year. General economic uncertainties were also affecting the automotive lubricants market.

Base oil demand in China was expected to rise ahead of the Lunar New Year holidays, which start on Feb. 10, but buying interest for imports has been less robust than anticipated. This might be partly because many buyers preferred to continue securing product from domestic producers, who have slashed prices in recent weeks. Domestic production has been steady, and most grades were available, with the exception perhaps of some heavy-viscosity grades such as API Group I bright stock. Prices for these cuts have weathered the recent downward price adjustments better than their light-viscosity counterparts as they have been more difficult to locate.

A number of cargoes were under discussion for shipment to China in February. A 1,900-ton lot was on the table for shipment from Singapore to Zhenjiang for arrival in late February. A 1,000-ton cargo was mentioned for shipment from Onsan, South Korea, to Dongguan at the end of January or mid-February. About 4,000 tons of two base oil grades were expected to be shipped from Daesan, South Korea, to Nantong in mid-February.

A two-month turnaround at a Thai base oil plant that started this month was expected to tighten regional availability of Group I base oils, driving prices up. Exports from Indonesia have also been reduced in recent months due to healthy domestic demand.

Meanwhile, Group II domestic supply was plentiful, and the restart of the Taiwanese Group II plant last December following a planned turnaround also meant that additional cargoes were available for shipment to China. There was also mention of a Taiwanese cargo being considered for shipment from Taiwan to the United Arab Emirates in February.

The Hyundai-Shell Base Oils plant in South Korea was running at reduced rates due to issues with feedstock supply from the associated refinery.

A global overhang of Group III base oils allowed buyers to be selective about suppliers, and a producer who has recently started up Group III production in China was heard to be offering competitive pricing to expand its market share.

Group III supply was ample in Asia because most plants were running well, but Petronas planned to start a two-month turnaround at its Group III plant in Malacca, Malaysia, at the end of January, which might lead to tighter conditions. The producer was heard to have built inventories to cover requirements during the outage but was not expected to have spot availability.

SK Enmove has also scheduled a one-month turnaround at its two Group III units in Ulsan, South Korea, in March and was expected to start building inventories ahead of the shutdown to meet contract commitments while the plant was offline.

There were several South Korean cargoes being discussed for shipment in February. A 1,000-ton lot was expected to be shipped from Yeosu to Singapore between Feb. 10 and Feb. 20. A 2,000-ton parcel was quoted for shipment from Daesan to Taichung, Taiwan, at the end of February, but there was a second cargo discussed for shipment from Yeosu to Taichung in mid-February. A 4,000-ton parcel was expected to be shipped from Onsan to Merak, Indonesia, in February.

A 1,300-metric ton cargo was also mentioned for shipment from Singapore to Go Dau, Vietnam, in mid-February.

The ongoing Yemen-based Houthi attacks on commercial vessels in the Red Sea continued despite the fact that the United Kingdom and the U.S. carried out a second joint round of strikes on Houthi targets this week. Many shipping companies have suspended operations in the Suez Canal and have rerouted vessels around the Cape of Good Hope in Africa, adding not only several additional days to the voyage, but substantial costs as well. The higher freight rates on certain routes such as the one covering Asia to Europe have discouraged a number of transactions as prices were deemed unworkable. Some of the vessels are also tied up for longer periods, so vessel space has also tightened.

The climbing freight rates have also impacted routes that are not directly affected by the hostilities in the Red Sea, such as the Asia-West Coast South America route.

Crossing of the Panama Canal in Central America had also led to shipping delays because only a limited number of vessels had been allowed to use the canal every day due to low water levels, but that situation was said to be improving. This would lift some of the pressure on Asian shipments looking to be moved to the U.S. Gulf or East Coast South America.

The hostilities in the Middle East, including the Israel-Hamas war, also impacted crude oil and feedstock prices. Crude oil futures were on an upward trend for most of the week, with numbers edging up on Wednesday on a larger-than-expected U.S. crude storage drop, a dip in U.S. crude output, geopolitical tensions, a weaker dollar and economic stimulus in China. According to Reuters, China’s central bank will slash the amount of cash that banks must hold as reserves from Feb. 5, a move expected to prop up a fragile economic recovery. U.S. crude oil output was down because of extreme winter weather in large parts of the country, but particularly in North Dakota, which is the third largest oil-producing state.

On Jan. 25, Brent March 2024 crude futures were trading at $81.23 per barrel on the London-based ICE Futures Europe exchange, from $78.22/bbl on Jan. 18.

Dubai front month crude oil (Platts) financial futures for February 2024 settled at $79.06 per barrel on the CME on Jan. 24, from $76.57/bbl on Jan. 17.

Base oil prices in Asia were mixed compared to the previous week. 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 higher from the previous week. The Group I solvent neutral 150 grade was unchanged at $870/t-$910/t, and the SN500 was assessed at $990/t-$1,020/t. Bright stock was up by $10/t at $1,200/t-$1,240/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were steady at $950/t-$980/t, and the 500N was assessed at $970/t-$1,010/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 edged up by $10/t to $1,040/t-1,080/t, FOB Asia on tightening supply.

The Group II 150N was unchanged at $760/t-$800/t FOB Asia, and the 500N was assessed at $780/t-$810/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were stable. The 4 cSt was heard at $1,160-$1,190/t, and the 6 cSt was hovering at $1,140/t-$1,180/t. The 8 cSt grade was unchanged 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.