One of the countries that has seen the rationalization of Group I production in recent years is Japan. Several refineries have been closed permanently or repurposed for the production of biofuels, and domestic demand has shrunk. Currently, an unplanned extended shutdown at Idemitsu’s Group I plant following a fire last July will likely last until the end of the year, and a two-month turnaround at a Cosmo Oil unit that started in late September was expected to be completed this month. Expectations are that a third Group I unit in Japan will start an extended turnaround in the first quarter of 2025. There was no update available from producers regarding the operating status of the plants.

In Indonesia, it was heard that Pertamina had started a turnaround at its Cilacap Group I unit in mid-October that might be completed in mid November.

In South Korea, S-Oil was understood to have completed a turnaround at its Group I and Group II units in Onsan which started in mid September. The producer has continued to meet its contractual obligations, but has suspended spot offers for the time being. Group III cuts were not expected to have been affected.

In India, the Group I/II plant of Indian Oil Corporation Limited in Haldia underwent a scheduled turnaround starting in August, but the unit was heard to have restarted. Also in India, CPCL embarked on a brief shutdown on its Group I unit in Chennai in late October.

Operations at Dalian Petrochemical’s Group I plant in China were expected to cease before the end of the year to relocate the facilities, leading to a small tightening of supplies.

Aside from these turnarounds affecting mostly Group I production, it was heard that a Chinese coal-to-liquids Group III plant started a shutdown in late October, limiting extra supplies, while a second producer reduced operating rates due to weak market economics.

GS Caltex was heard to be planning a turnaround at its Group II/III plant in Yeosu in March or April 2025, but further details are unavailable at this time.

Base oil activity in China has been subdued and lubricant consumption has weakened. This was partly attributed to less robust economic growth than anticipated and the push for electrification of China’s automotive parc, among other factors. A couple of Group II plants were expected to be taken off-line this month and the next to offset the reduced requirement levels.

While some segments such as agriculture, marine, rail and heavy-duty transportation still consume large amounts of Group I grades, demand for Group II and Group III grades has slumped. This has exerted pressure on pricing and discouraged imports, although ample volumes of Group III grades were expected to arrive in the country from the Middle East.

The fact that domestic production has been outpacing demand for some grades has led to more Group I and Group II cargoes being exported from China, which had not been the case in previous years because the government wanted to ensure that most of the production was used for the domestic market in order to reduce China’s dependence on imports. Slightly oversupplied conditions of some base oil grades have led to competitive situations among domestic suppliers as well as some export transactions. For instance, a 5,000-metric ton cargo was mentioned for shipment from Shanghai to Mumbai, India, in mid November.

Import prices of Group I and Group II grades were considered less attractive in the Chinese market as domestic values have come down, particularly for Group I bright stock and other heavy grades. The heavier viscosity cuts do not see as much demand in the winter as lighter grades are favored. Chinese consumers also faced competition with consumers in other countries for Group I cargoes coming from Southeast Asia, which sometimes drives prices up.

Prices for imports of Group I and Group II heavy-viscosity cuts were moving up because stocks have almost been depleted as imported volumes have tumbled year-on-year, and replenishment volumes were expected to cost more. However, demand was also anticipated to decline as the year-end approaches and economic uncertainties linger.

The sole Taiwanese Group II producer, Formosa Petrochemical, used to ship a large portion of its monthly output to China. This changed since China reimposed a tariff on Taiwanese refined products earlier this year. As a result, more Taiwanese products are moving to other destinations, such as India, the Middle East and Southeast Asia. Additionally, the lower demand from China coincided with a period of reduced output at the plant in Mailiao, but operating rates were heard to have ramped up.

There were reports that a 2,000-metric ton cargo for shipment from Taiwan to the Philippines would likely take place in the second half of November. A 4,000-ton parcel was also quoted for shipment from Mailiao to Hamriyah, United Arab Emirates, between November 10 and 20. A 5,000-ton to 6,000-ton lot was anticipated to be shipped from Mailiao to Lagos, Nigeria, this month as well.

In India, activity picked up following the Diwali holidays, but current base oil offers seemed to be met with lukewarm buying interest, as many buyers were still holding adequate contract volumes to keep operations running, and some preferred to wait until more attractive spot offers became available.

Typically, there is a surge of competitively priced imports in the fourth quarter, particularly from the U.S. Tighter conditions in the domestic U.S. market, combined with steep prices, led to fewer transactions being concluded this month, but it was heard that negotiations were ongoing for December Group II cargoes.

Imports also faced competition from increased domestic production at Indian base oil plants, and lower prices from domestic suppliers as well as from Northeast Asian sellers.

Import prices for Group I grades were largely stable, with some upward pressure noted on bright stock given more limited availabilities and CFR India prices edging up by $5 per metric ton to $10/t from a week ago.

Discussions for Group II cargoes were thin too, and buyers did not seem to be in a rush to secure volumes as they expected regional availability to be sufficient to meet immediate product needs. The lighter grades were more readily available than their heavier counterparts and this led to lower price ideas for the light cuts.

Prices for Group III cuts were largely stable because of reduced volumes emerging from South Korea, even though availability from other sources such as the Middle East remained plentiful.

Negotiations were taking place for import cargoes from various origins, with a prompt cargo of 12,000 tons discussed for shipment from Yanbu, Saudi Arabia, to Mumbai, and a similar cargo also mentioned for shipment in the second half of November. A 10,000-metric ton lot was anticipated to be shipped from South Korea to West Coast India (WCI) in the second half of November. A 3,000-ton lot was mentioned for shipment from Singapore to WCI in the SH of November as well. About 12,000 tons to 18,000 tons were also discussed for shipment from Yanbu and Jeddah, Saudi Arabia, to Mumbai and Hazira in late November.

In other regional cargo movements, it was heard that a 3,000-ton base oil cargo was likely to be shipped from Daesan, South Korea, to Chittagong, Bangladesh, between November 10 and 24.

Prices

Crude oil futures fell after U.S. supply disruptions caused by Hurricane Rafael in the Gulf of Mexico eased, and a stimulus announcement in China disappointed investors on Friday. Weak economic prospects in China were expected to translate into lower crude oil demand from the world’s top importer, with October imports recording a sixth consecutive decline.

On November 11, Brent January 2025 futures were trading at $73.63 per barrel on the London-based ICE Futures Europe exchange, from $74.03/bbl on November 4.

Dubai front month crude oil (Platts) financial futures for December 2024 settled at $72.72/bbl on the CME on November 8, from $71.81/bbl on November 1.

Spot base oil prices were generally assessed as stable compared to the previous week as few transactions emerged and suppliers kept their offers largely intact. 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 generally steady, although bright stock inched up. Group I solvent neutral 150 was heard at $820-860/t and SN500 held at $1,040-1,080/t. Bright stock prices were steady at $1,290-1,330/t, all ex-tank Singapore.

Prices for Group II 150 neutral were assessed at $860-900/t and 500N was unchanged at $1,060-1,100/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 held at $660-700/t and SN500 was also unchanged at $900-940/t. Bright stock prices were higher by $10/t at $1,090-1,140/t, FOB Asia.

Group II 150N was assessed at $720-760/t FOB Asia and 500N held at $920-960/t FOB Asia.

In the Group III segment, the 4 cSt grade remained exposed to downward pressure due to oversupply, but held at $1,040-1,080/t, and 6 cSt was also unchanged at $1,060-1,100/t. The 8 cSt cut was steady at $970-1,010/t.

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.