Additionally, lubricant demand had slumped at that time as a microchip crunch, transportation issues and labor shortages had led to reduced factory output and temporary closures at automotive factories and other manufacturing plants.

While the situation was still not at “normal” levels, conditions were gradually improving, with some of the large automakers planning to return to full production in the next couple of months. Toyota announced that its car production was back on track, with all plants and production lines in Japan scheduled to operate normally in December for the first time in seven months, Automotive News reported. Toyota said that all 14 plants and 28 production lines in Japan will be “operating normally” for the first time since May. The company’s global production was expected to increase in December by 40,000 units compared to the same month a year ago. Similarly, according to Reuters, Honda Motor Co.’s Japanese car factories will return to normal operations in December, after working at around 90% capacity in November due to a shortage of chips and supply disruptions from COVID-19 lockdowns overseas.

This was good news for many lubricant and finished products suppliers, given that a huge portion of output is typically allotted to the automotive industry. Industrial applications are also a very important part of the lubricants business, and a return to normal operations at factories and manufacturing plants would likely lead to increased demand for industrial lubricants.

One somber spot in an otherwise promising scenario was that a surge in coronavirus cases in Europe was forcing governments in a few countries to reimpose lockdowns and other measures, and this could result in reduced global demand for base oils and lubricants as the population’s mobility gets curtailed, sources said. Soaring gasoline prices have also led to a reduction in driving, inflation and depressed economic activity in many areas, with the governments of the United States, Japan, India, South Korea, China and Great Britain discussing the release of national oil reserves to counteract the climbing gasoline price trend.

On the other hand, increased air travel over the last few weeks as some countries have relaxed border restrictions has sparked renewed demand for jet kerosene and an increase in refinery production rates to cater to this segment of the fuel market.

The higher refinery output rates have generally led to increased production of base oils, although high diesel and other refined product prices have also resulted in refiners diverting raw material streams to produce more of the fuels and fewer base stocks in recent weeks,

Southeast Asian refiners were producing ample volumes of Group I cuts, which were mostly absorbed within the region, although surplus volumes of bright stock were noted. Chinese buyers have shown interest in light-viscosity imports, but movements from Southeast Asia to China were limited. Most players worried about transportation issues as vessel space was still scarce and freight rates have skyrocketed. Domestic prices in China were also heard to be sliding, making imports less attractive.

The lengthening supply of Group I and Group II heavy grades has led a key Southeast Asia producer to lower its prices as of Nov. 19. The producer’s Group I solvent neutral 500 edged down by $20 per metric ton and its bright stock by $60/t, according to sources. The producer’s Group II 500N fell by $40/t. There were no changes for the Group I and Group II light grades.

Supply of Group II grades was also said to be adequate, with the light-vis cuts in higher demand given that cold-weather formulations generally require lighter grades. As a result, the downward price trend affecting the heavy-viscosity grades was less evident on the lighter products. Logistical difficulties and steep freight rates were also hampering the movement of base oils to other regions, and the surplus kept exerting pressure on local numbers.

An increase of Group II shipment volumes from Taiwanese producer Formosa Petrochemical to China in November, compared to the previous months when the supplier’s plant underwent a turnaround, took some of the pressure off of Group II price indications.

In India, buying interest for Group II base stocks has weakened as buyers expected prices to continue to slide. The arrival of cargoes from South Korea, the U.S. and the Middle East also assuaged concerns about potential product shortages. Due to the plentiful supply, Indian buyers were growing increasingly resistant to suppliers’ current offer levels. South Korean suppliers were looking for opportunities to ship base oils to other markets such as the Middle East, where prices were comparatively higher.

Within the Group III segment, demand for the 4 centiStoke grade remained robust in Asia, while requirements for the 8 cSt cut were lackluster, exerting downward pressure on pricing. Supply and demand for the 6 cSt grade were deemed more balanced and prices were largely stable.

Spot base oil prices were mixed again this week as each base oil segment seemed to be swayed by different fundamentals. 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 steady to soft as a major supplier adjusted some of its prices down. The Group I solvent neutral 150 grade was holding at $870/t-$900/t, but the SN500 was revised down by $10-20/t to $1,020/t-$1,060/t. Bright stock fell by $30/t to $1,250/t-$1,290/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were steady at $910/t-$950/t, while the 500N was down by $20/t to $1,240/t-$1,280/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $770/t-$810/t, and the SN500 was down by $10/t at $880/t-$920/t. Bright stock was assessed down by $20/t at $1,110/t-1,150/t, FOB Asia.

The Group II 150N was stable at $800/t-$840/t FOB Asia, but the 500N and 600N cuts were down by $40/t at $1,000/t-$1,040/t, FOB Asia.

In the Group III segment, prices were largely steady, although the 8 cSt continued to be exposed to downward pressure due to lukewarm demand and plentiful supply. The 4 centiStoke was holding at $1,440-$1,480/t and the 6 cSt was at $1,430/t-$1,470/t. The 8 cSt grade was assessed at $1,220-1,260/t, FOB Asia, all for fully approved product.

Upstream, crude oil futures slipped on news that key consumer countries such as the U.S., China, India, South Korea, Great Britain and Japan would be tapping into strategic crude reserves to tame rising gasoline prices as the OPEC+ was not expected to increase production over the next few months. However, reports circulated that the organization might consider an output increase during a meeting scheduled for next week. The question was whether demand would remain robust as European nations were dealing with a resurgence of coronavirus infections.

On Nov. 24, Brent January futures were trading at $82.58 per barrel on the London-based ICE Futures Europe exchange, from $80.02/bbl on Nov. 18.

Dubai front month crude oil (Platts) financial futures for December settled at $79.65/bbl on the CME on Nov. 23, from $77.37/bbl on Nov. 17 (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)

Editor’s note: Due to the U.S. Thanksgiving holiday on November 25 and a modified publishing schedule, market commentary and prices reflect activity until Nov. 24.

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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