Demand for the heavier grades has softened due to seasonal patterns and some production disruptions at lubricant manufacturing plants caused by a shortage of certain raw materials such as additives, leading base oil buyers to hold off on fresh purchases.

The lower number of employees working at facilities, the need to social distance and other pandemic-related issues have been affecting factories and offices since early 2020 and have resulted in reduced operations in a number of locations, including some large car manufacturing sites. This had led to lower demand for automotive and industrial lubricants and consequently, base oils as well.

At the same time, with the relaxation of lockdowns in countries such as India, Thailand and Indonesia, transportation and driving has increased, which has led to higher demand for lubricants and fuels. Given the rise in consumption of fuels such as diesel and accompanying higher prices, a number of refiners have raised fuel production, with the resulting reduction in base oil output.

Chinese buyers have returned to the market in search of light viscosity grades, but many suppliers were hesitant to conclude transactions due to port congestion and transportation delays. Nevertheless, regional suppliers such as the South Korean producers kept eyeing the possibility of shipping product to China as demand in other markets has softened.

This uptick in Chinese demand has coincided with a return to production of most base oil plants, which completed turnarounds during the year. The exception perhaps was one plant in South Korea, which was heard to have halted production of its heavy base oil cuts. This information could not be confirmed with the producer directly.

A number of producers have found export opportunities to place some of their excess production in overseas markets such as the United States and Latin America, although supply there was also lengthening and demand declining.

Some API Group III suppliers have increased the volumes shipped within Asia, with South Korean producers, for instance, heard to have upped the cargoes shipped to Asian destinations since September to levels not seen since the start of the pandemic. There has been an increase in shipments to the U.S. as well. A 3,000-metric ton parcel was heard to have been booked from South Korea to the U.S. Gulf this month, and another 3,000 tons were being quoted to Tianjin, China. A 3,000-ton parcel was on the table from South Korea to Taiwan for late Nov. lifting as well. A 4,000-ton cargo was being discussed for shipment from two South Korean ports to Thailand in early December.

The restart of Formosa Petrochemical’s Group II plant in Taiwan has also led to increased exports to China and India along with ample supply levels for the domestic market.

Looking ahead, the Group III sector might see some tightening in the first half of next year, when the Hyundai-Shell plant in Daesan, South Korea, was expected to undergo a turnaround, starting in early April for approximately one month, according to sources.

Despite last week’s celebration of the Diwali holidays, base oil activity in India has remained healthy. Aside from securing products from local producers and Asian suppliers, Indian consumers have also taken advantage of the chance to import competitively-priced light grades from the U.S., where supply of these cuts was more than adequate to cover domestic requirements. Several shipments of heavy grades had made their way from Southeast Asia to India in previous months, but these movements have waned. Some issues facing buyers were the logistical disruptions and freight increases that have affected both container and bulk shipments over the last several months. There was also plentiful supply of heavy grades from domestic producers in India, with suppliers adjusting prices down, while the lighter cuts were tighter and domestic prices have edged up.

Spot base oil prices were mixed again in Asia this week, with some grades moving up, others softening and some remaining unchanged. The spot ranges portrayed below have been revised to reflect bids and offers, deals and published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were mixed. The Group I solvent neutral 150 grade was higher by $20/t at $870/t-$900/t, and the SN500 slipped by $20/t to $1,030/t-$1,080/t. Bright stock fell by $30/t to $1,290/t-$1,330/t, all ex-tank Singapore.

Prices for the Group II 150 neutral moved up by $20/t to $910/t-$950/t, while the 500N was lower by $20/t at $1,260/t-$1,300/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was up by $30/t at $750/t-$790/t, while the SN500 was steady at $890/t-$930/t. Bright stock was assessed down by $20/t at $1,150/t-1,190/t, FOB Asia.

Group II 150N moved up by $30/t to $790/t-$830/t FOB Asia, and the 500N and 600N cuts were down by $10/t at $1,070/t-$1,110/t, FOB Asia.

In the Group III segment, prices were steady to softer. The 4 centiStoke was holding at $1,410-$1,450/t and the 6 cSt at $1,420/t-$1,460/t. The 8 cSt grade was lower by $20/t at $1,260-1,300/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures had been on an upward trek until Wednesday, when they fell after the U.S. Energy Information Administration reported an inventory build for the week of Nov. 5. Oil prices had moved up on news that the U.S. government would lift travel restrictions for visitors from 33 different countries, which was likely to result in an increase in jet fuel demand.

India’s fuel demand also jumped in October to the highest in seven months as economic activity recovered, Reuters reported.

On Nov. 11, Brent January futures were trading at $82.66 per barrel on the London-based ICE Futures Europe exchange, from $83.51/bbl on Nov. 4.

Dubai front month crude oil (Platts) financial futures for December settled at $79.10/bbl on the CME on Nov. 10, from $78.44/bbl on Nov. 3 (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)

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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