However, the tone turned more bullish on Thursday and prices rose for a second session in early trading, driven by a more significant draw in U.S. stockpiles than anticipated. Prices then steadied on mixed signals from the U.S. economy, with concerns about a slowdown contending with rising expectations that the Federal Reserve would soon lower interest rates.

On July 18, Brent September 2024 crude futures were trading at $84.79 per barrel on the London-based ICE Futures Europe exchange, down from $85.71/bbl on July 11.

Dubai front month crude oil (Platts) financial futures for August 2024 settled at $83.63/bbl on the CME on July 17, compared with $84.18/bbl on July 10.

Tightness in the API Group I segment persisted, but softening demand offset the lack of availability of sizeable spot cargoes. Southeast Asian suppliers prioritized domestic requirements as well as contractual obligations, which left them with smaller cargoes to offer up for spot business. Prices were generally stable because buyers appeared unwilling to increase their buying indications as they felt no pressure to acquire additional cargoes. Suppliers were reluctant to adjust prices down given crude oil and feedstock price pressure. Most consumers had built inventories ahead of the rainy season and had adequate supplies to run day-to-day operations.

Heavy rains and flooding in many areas in Southeast Asia, Bangladesh and India affected economic activity and dampened demand for base oils and lubricants, offsetting the lack of base oil spot availability. A cargo offered under a tender deal was heard concluded at about $10 per metric ton below the FOB Asia bright stock spot range reported last week.

China was a bit of an exception in that demand for Group I bright stock continued largely unabated, with the industrial, heavy-duty transportation and agricultural segments calling for steady amounts of Group I cuts. Recent capacity additions in China were only for Group II grades, and a Group I expansion at PetroChina Fushun’s facilities is anticipated to come online during the current quarter, but a start-up date could not be confirmed. The expanded capacity will only be for bright stock, highlighting China’s chronic shortage of this grade.

While the Group I cuts remained snug, the situation was slightly different for Group II grades, especially in China, where several Group II plants were either running at reduced rates or temporarily halted operations to avoid oversupply. Interest in Group II imports has also been lackluster.

Fewer Taiwanese cargoes were expected to arrive in China as the country has reimposed a 6% tariff on Taiwanese refined products, including base oils, which went into effect on June 15. The volumes of Taiwanese material shipped to China had been declining even before the tariff implementation. Additionally, offers of domestically produced Group II grades were considered competitive against imports. Despite importers lowering offers to attract buyers, business was rather muted.

Domestic production of Group III grades was also increasing in China and a relatively fresh newcomer’s products were heard to have attained the required specifications, allowing it to compete with other more established suppliers. There were competitive offers for Group III grades as producers contended for market share, while a local importer and distributor was heard to be also actively offering Middle Eastern material.

Group III availability in Asia has increased in recent weeks on declining regional buying interest and increased production as a large South Korean producer had completed a turnaround in May. However, there were expectations that spot supplies would be reduced next month because of the upcoming turnaround at the SK-Pertamina plant in Dumai, Indonesia. The turnaround, which was originally scheduled for May, was later postponed to July, and has now been scheduled for August. The maintenance program will likely reduce regional short-term Group III inventories, but the producer was expected to build inventories to cover term commitments.

S-Oil has also scheduled a turnaround at its Onsan plant in September/October which might affect Group II and Group III availability, but the producer was expected to build inventories ahead of the outage as well. A sudden tightening of Group III supplies in Asia exerted pressure on spot prices over the last two weeks, with numbers moving up last week and staying largely steady this week.

While there have also been growing supplies of Group II seen in the Asian market, South Korean suppliers stood by their offers and seemed reluctant to lower prices because of firmer crude oil and feedstock prices.

In India, most buyers had built inventories ahead of the monsoon season, which typically causes extensive flooding and transportation disruptions, and this has dampened buying appetite for fresh cargoes.

Attractive prices for domestic supplies of Group I and Group II grades also placed pressure on imports and led to downward price adjustments. It was heard that spot prices for Group II grades underwent a $10/t downward revision on a CFR India basis.

While there had been numerous U.S. Group II cargoes shipped to India in the first four months of the year, offers have all but disappeared on tighter supplies at origin and difficulties in making prices work. Hurricane Beryl, which battered large swaths of the U.S. Gulf Coast last week, caused less damage to production facilities than expected, and a Group II plant in Louisiana has also restarted after a turnaround that had restricted spot supplies.

South Korean suppliers continued to work on shipments to India, with about 40,000-45,000 tons being considered for loading in South Korea to West Coast India in the first half of August. Details of a 15,000-ton lot lifted in Ulsan, South Korea and shipped to Mumbai and Kandla on the Furano Galaxy last June also emerged this week.

In terms of other South Korean shipping activities, the pace seems to have dwindled compared to about two weeks ago, when a barrage of business was being discussed. Suppliers appear to have set their sights on more distant destinations, with a 4,000-ton parcel mentioned for shipment from South Korea to Callao, Peru, in July or August.

Base oil spot prices in Asia were stable to slightly lower, with some prices seeing adjustments on lengthening supplies and subdued buying interest. 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 stable-to-soft. The Group I solvent neutral 150 grade was steady at $890-930/t, but the SN500 was lower by $10/t at $1,040-1,080/t. Bright stock was hovering at $1,280/t-$1,320/t, all ex-tank Singapore.

Prices for the Group II 150 neutral slipped by $10/t to $960-1,000/t, and the 500N was also assessed down by $10/t at $1,060-1,100/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $760-800/t, and the SN500 was holding at $920-940/t. Bright stock prices were assessed down by $10/t to reflect a deal involving Southeast Asian material and current bid levels at $1,060-1,100/t, FOB Asia.

The Group II 150N was lower by $10/t at $790-830/t FOB Asia, but the 500N was steady at $910-950/t FOB Asia.

In the Group III segment, 4 cSt, 6 cSt and 8 cSt prices were largely unchanged from the previous week. The 4 cSt grade was hovering at $1,110-1,150/t, and the 6 cSt was heard at $1,120-1,160/t. The 8 cSt cut was holding at $1,000-1,040/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.