Chinese demand for base oils had been on the rise as inventories had been depleted and domestic supply was not deemed sufficient to cover demand as many plants had been shut down in previous months on reduced base oil consumption and tax issues. The country is also structurally short on the heavier grades, forcing consumers to utilize imported barrels. Importers were heard to be looking for opportunities to secure product for the first quarter of 2023, as demand tends to increase ahead of the busier spring lubricant production cycle, but they were constrained by the fact that domestic prices fell, and imports were not as competitive.

At the same time, supply was also expected to increase with the return to production of a few Chinese base oil plants. There was also ample availability of Southeast Asian cargoes, particularly of API Group I cuts, because demand in that region has subsided. A rare export transaction was heard discussed this week involving a 4,000-metric ton cargo for shipment from Maoming to Singapore in mid-December.

Elsewhere in Asia, buyers appeared to be cautious about securing base oil cargoes as both buyers and sellers preferred to end the year with low inventories to avoid paying taxes on existing stocks. Buyers were also uncertain about short-term requirements because the demand outlook was unclear, with a global economic slowdown and rising inflation in many countries expected to dampen demand for fuels and lubricants, among many other goods.

A number of Asian refineries had adjusted run rates down on reduced demand of refined products, but base oil margins have improved compared to diesel, which incentivized producers to maintain base oil production rates, adding to the base stock overhang which was exerting downward pressure on spot prices. The supply glut, particularly of Group I and Group II light-viscosity grades, may be reduced in the first quarter when a couple of Southeast Asian plants were anticipated to shut down for maintenance.

In India, there appeared to be interest in Northeast Asian supplies as prices in other regions such as Europe and the United States were not as competitive. Indian buyers have also been relying more heavily on domestic production of base oils and were expecting the arrival of a number of U.S. barrels this month purchased a few months ago. The number of Taiwanese cargoes moving to India was expected to be lower than in previous months as the Taiwanese Group II producer had committed several shipments to meet Chinese requirements.

South Korean suppliers were heard to have lowered offers for light grades in order to attract buying interest in India and compete with supplies from other origins and from domestic producers. This week, there were discussions to move 3,500 metric tons of base oils from Daesan and/or Ulsan to Chennai in December or early January. A 2,500-metric ton lot was mentioned for shipment from Ulsan to Budge Budge in early Jan. Additionally, about 7,800 metric tons of base oils and solvents were on the table to be shipped from Singapore to Kolkata, Kakinada and Ennore the first week of January. There was also a 3,000-4,000-metric ton parcel mentioned for shipment from India to the United Arab Emirates in mid Dec.

Group III cargoes continued to see steady demand, and availability of most grades was deemed ample to slightly tight, with the 4 centiStoke grade gaining traction in automotive applications over the last few years.

Asian buyers and sellers were negotiating next year’s term contracts, and consumers appeared interested in ensuring more volumes were purchased under contract than in years past to avoid extreme price spikes and potential product shortages when spot availability tightens.

Spot base oil prices were assessed steady to softer this week as demand has weakened and supply has lengthened. 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 have declined from the previous week. Spot prices for the Group I solvent neutral 150 grade were heard down by $10/t to $980/t-$1,010/t, while the SN500 was down by $20/t to $1,080/t-$1,120/t. Bright stock was also lower by $20/t at $1,250/t-$1,290/t, all ex-tank Singapore.

Prices for the Group II 150 neutral dropped more sharply by $40/t to $1,040/t-$1,080/t, and the 500N also fell by $40/t to $1,080/t-$1,120/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was holding at $830/t-$870/t, and the SN500 fell by $30/t to $880/t-$920/t. Bright stock prices were holding at $990/t-1,040/t, FOB Asia.

The Group II 150N was assessed lower by $20/t at $890/t-$930/t FOB Asia, and the 500N and 600N cuts were also down by $20/t at $940/t-$970/t, FOB Asia.

In the Group III segment, prices were largely stable. The 4 cSt was assessed at $1,530-$1,570/t, and the 6 cSt was holding at $1,490/t-$1,530/t. The 8 cSt grade was steady at $1,210-1,250/t, FOB Asia, for fully approved product.

Upstream, crude oil prices settled lower for a fifth consecutive session on Thursday as concerns about a global economic slowdown possibly leading to reduced crude oil demand overshadowed the closure of the Keystone pipeline, a major Canada-to-U.S. crude supply line, following a spill into a Kansas creek.

On December 8, Brent February 2023 futures were trading at $76.52 per barrel on the London-based ICE Futures Europe exchange, from $86.87/bbl on Nov. 31.

Dubai front month crude oil (Platts) financial futures for January settled at $70.89 per barrel on the CME on Dec. 7, compared to $80.46/bbl for December futures on Nov. 30.

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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Historic and current base oil pricing data are available for purchase in Excel format.