Buyers in the region did not seem concerned about potential supply shortages, as availability of most base stocks was actually expected to lengthen in the coming weeks, particularly once a couple of the plants that are currently shut down are brought back online. There were expectations that Group II and Group III grades in particular would be plentiful, although heavy-viscosity grades might remain a bit tighter for a while longer.

As has been the case since last year, Group I availability remained snug, with bright stock being a very sought-after grade, which catapulted its price to fresh highs over the last couple of weeks. Most of the Group I production sites are concentrated in Southeast Asia, and producers have prioritized domestic markets, leaving less product for export into other markets in the region. Even so, there were reports of some Thai cargoes becoming available for October shipment and a Chinese refiner also entered the export market with October offers.

Japan used to be a key producer of Group I base oils as well, even though Japanese exports had been limited as producers catered mostly to domestic requirements, but the closure of two Eneos plants since 2022, the unplanned extended shutdown of a Japanese plant following a fire last July and Idemitsu Kosan’s two-month turnaround that started in late September have all contributed to a tightening of supplies.

At the same time, Chinese buyers also had to compete in the regional market to secure Southeast Asian Group I cargoes, but values seemed to be out of reach for many consumers at the moment, particularly as domestic suppliers were offering competitive prices in order to gain or protect market share.

A Group I plant in China, PetroChina’s Dalian Petrochemical, was expected to be shuttered before the end of the year, leading to a small tightening of supplies. Spot prices for Group I grades were generally holding at steady levels compared to Group II cuts, which have become more plentiful in the region. That said, Group II availability in China has also been slightly affected by a reduction in Taiwanese Group II imports and a current turnaround in South Korea that has led to a curtailment of spot supplies in the region.

South Korean producer S-Oil was heard to have limited spot availability as it is conducting a turnaround at its Group I/II/III plant in Onsan, but the producer was expected to be able to meet contractual obligations. The unit was shut down in mid September and was expected to restart at the end of October.

Availability of Group III grades was generally not expected to be a problem in the coming months, as most regional plants were running well, ongoing maintenance will be completed soon, and there were no scheduled turnarounds in the fourth quarter. There have also been reports of increased volumes of Middle Eastern products being offered in Asia, but some of these offers faced stiff competition from domestic producers, particularly in China.

In terms of shipments, it was heard that 5,000-6,000 metric tons of base oils were being considered for shipment from the United Arab Emirates to central China in the second half of October. About 1,200 tons were also expected to be shipped from Onsan, South Korea, to Huizhou in mid-October, with a second cargo of 2,900 tons on the table to cover the same route on similar dates. A 1,300-ton lot was anticipated to be shipped from Onsan to Tianjin at the end of October. A 1,800-ton parcel was heard to have been lifted in Onsan for Zhangjiagang/Jingjiang at the end of September. A 6,650-ton parcel was heard to have been lifted in Daesan, South Korea, to Changzhou on September 26-28 on the Sun Neptune.

In India, demand for Group III grades saw a dip during monsoon season as activity in the automotive industry was dampened by reduced demand for automobiles. Transportation, logistics and industrial activity were all impacted by the heavy rains and flooding, which led to reduced demand for heavy base oil grades, particularly bright stock. However, as activity levels started to perk up, buyers were on the lookout for bright stock cargoes but they encountered limited supplies and steeper import prices. Spot prices for imports were largely unchanged, although bright stock prices continued to be exposed to upward pressure due to limited regional supplies.

Conversely, there were expectations of enhanced availability of Group II grades, not only in Asia but also from the United States as hurricane season was nearing an end and producers started to clear inventories built in case of weather-related supply disruptions. They had already lowered their domestic posted prices and were expected to offer up additional volumes into the export market in the coming weeks. The Excel Paralubes plant in Louisiana, which had an unplanned shutdown in August, was heard to have rebuilt inventories. There were no updates yet on whether any base oil and lubricant facilities had been damaged by Hurricane Helene, which hit the U.S. Gulf Coast late last week, causing flooding, widespread destruction and power outages in several states.

Indian buyers stayed fairly cautious as they expected base oil prices to be exposed to downward pressure given growing supplies. Domestic production was fairly steady and many buyers preferred to rely on local product rather than be exposed to price unpredictability for imports as domestic producers offered competitive pricing. There were also expectations that Indian Oil’s new Group II/Group III unit in Haldia would come on stream in the near future, expanding domestic supply options, although no updates were available by the time of publication.

A number of cargoes were discussed for shipment to India this week. Between 22,000-33,000 tons were quoted for shipment from Yeosu, South Korea, to Mumbai October 10-20. Another 20,000 tons to 25,000 tons were also mentioned for possible shipment from Yeosu to Mumbai and Kandla in late October as well. About 15,000 tons were expected from Ras Laffan, Qatar, to West Coast India in the second half of September.

Prices

While crude oil price fluctuations typically do not translate into similar base oil adjustments overnight, participants kept a watchful eye on crude futures and feedstock prices as they remained volatile. Oil futures lost significant territory in September compared to August but they recovered some of the forfeited ground. Last Friday, futures moved up driven by escalating tensions in the Middle East, particularly the intensifying conflict between Israel and Hezbollah, which spurred concerns about disruptions to oil supply and maritime routes. On Monday, September 30, futures were trading higher on increasing fears about potential production issues after Israel stepped up attacks on Iranian-backed forces over the weekend.

On September 30, Brent November 2024 contract (set to expire on Monday) futures traded at $72.49 per barrel on the London-based ICE Futures Europe exchange, from $74.64/bbl on September 23. In comparison, Brent traded at $71.95/bbl on September 16.

Dubai front month crude oil (Platts) financial futures for October 2024 settled at $71.16/bbl on the CME on September 27, from $73.19/bbl on September 20, and $70.72/bbl on September 13.

Spot base oil prices were again mixed in Asia this week, with some values edging down because of lengthening supply and slowing demand, while others remained steady on more limited availability. 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 largely steady. Group I solvent neutral 150 grade was unchanged at $860-900/t and SN500 was assessed at $1,060-1,100/t. Bright stock prices were firm at $1,280-1,320/t, all ex-tank Singapore, on limited availability.

Prices for Group II 150 neutral slipped by $10/t to $890-930/t, but 500N held at $1,050-1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 edged down by $10/t to $680-720/t, but SN500 held at $910-940/t. Bright stock prices were firmly positioned within a range of $1,090-1,130/t, FOB Asia, on tight supplies.

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, 4 cSt, 6 cSt and 8 cSt prices were largely unchanged on thin trading. The 4 cSt grade was heard at $1,090-1,130/t and 6 cSt was assessed at $1,100-1,140/t. The 8 cSt cut hovered at $980-1,020/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.