In the absence of decisive trading activity, base oil prices were steady with only a couple of grades showing upward revisions given a tight supply and demand ratio. Ongoing economic issues in several countries of the region, including China, coupled with efforts to lower inventories before year-end and looming tariffs as United States president-elect Donald Trump has pledged to impose new import duties also fanned feelings of uncertainty. Some attention also turned to South Korea this week after President Yoon Suk Yeol’s short-lived martial law order triggered calls for his impeachment.
Additionally, China’s top leadership was expected to meet for the annual Central Economic Work Conference this week as well. During the two-day meeting – held under wraps and highly anticipated by markets – China’s leaders were anticipated to delineate the country’s growth goals and stimulus plans for 2025.
The Chinese government has pushed for the electrification of the country’s car fleet, resulting in a significant increase in electric and hybrid vehicle sales. In July 2024, just over 50% of new cars sold in China were electric or hybrid, according to media reports. This trend has reduced demand for engine oils and other automotive fluids, instead resulting in an increase in demand for battery cooling fluids and other related products.
Experts speaking at the 18th ICIS Pan American Base Oils and Lubricants conference in New Jersey on December 5-6 said that affordable Chinese EVs were also making inroads into Latin America, likely altering the demand for conventional base oils and lubricants in that region. Asian base oil suppliers often look for export opportunities in the Americas, particularly the U.S., Mexico and West Coast South America. Speakers mentioned the construction by Chinese investors in the new Chancay mega-port in Peru, which could serve as a gateway to Latin America for a variety of Chinese exports.
Market participants also explained that even though EV penetration levels in Europe and the Americas was much lower than in China, softer global base oil demand was partly attributed to a decrease in lubricant consumption from the automotive segment, as newer models have longer drain intervals. Furthermore, even though older models and heavy-duty equipment still require recurrent oil changes, many end-users were delaying this service due to economic reasons.
With the exception of a couple of plants in Japan and China and one in Taiwan, most Asian base oil plants were running well. However, scheduled turnarounds in Japan, China, South Korea and Thailand early next year could lead to a tightening of spot supplies.
Currently, there were two Japanese plants that were off-line but were expected to be restarted this month. Eneos has also planned turnarounds at its plants in Japan next year. Japanese suppliers are not typically large players on the base stock export front, but the shutdowns might draw away regional cargoes to cover demand in the Japanese market.
A crucial turnaround will occur at a Group I plant in Thailand in the first quarter. The turnaround was expected to last for approximately two months and the producer was likely to build inventories ahead of the shutdown, but may not have extra availability for spot shipments, leading to strained Group I conditions in the region, according to sources.
In China, the permanent closure of Dalian Petrochemical’s Group I plant before the end of the year, and of the affiliated refinery by mid 2025, might also lead to a slight product tightening.
At the same time, a second Chinese producer has offered some spot volumes for export, a sign that certain Group I grades have lengthened. Nonetheless, bright stock was heard to be in short supply and was expected to remain strained early next year due to the Thai plant turnaround. Buyers appeared therefore more willing to secure barrels at steeper price levels ahead of the turnaround. Bright stock export prices have moved up as a result of the healthy demand and limited supply.
Conversely, the light Group II grades have started to become more widely available, and this exerted downward pressure on pricing. At the same time, there has been some tightening of the Group II 500N because the sole Taiwanese Group II producer, Formosa Petrochemical, has reduced operating rates due to refinery economics, curtailing production of the heavy-viscosity grade.
In South Korea, GS Caltex was heard to be planning to shut down its Group II/III plant in Yeosu for maintenance next March.
Given increased domestic production and regional supply uncertainties, Chinese buyers have started to rely more heavily on domestic base oils, which is what the government’s intention had been all along given its goal to reduce the country’s dependence on imports. Despite the increased domestic output, a deficit of the heavy-viscosity grades seemed to persist in China, with domestic suppliers raising prices for bright stock and Group II 500N week on week, particularly as regional supplies were expected to be strained.
Some base oil cargoes were quoted for shipment to China, including a 16,000-metric-ton parcel expected to be shipped from Singapore to Central China the last week of December. A 1,000-ton lot was on the table for shipment from Onsan, South Korea, to Tianjin between December 20 and 22. A 2,600-ton cargo was mentioned for possible shipment from Onsan to Zhangjiagang mid-December. About 8,000 tons were mentioned for lifting in Daesan/Ulsan, South Korea, to Nantong and Zhuhai at the end of December.
In India, Group I prices were under pressure as availability was deemed sufficient to cover current requirements and buying appetite was lusterless. Demand for base oils in general has been slightly disappointing in India, with this condition being partly attributed to a slowdown in the country’s economic growth rates the second half of the year, following a strong first half, according to reports.
Bright stock was an exception because it remained a sought-after grade due to steady demand from downstream segments such as heavy-duty transportation, industrial and agricultural applications, and regional supplies have tightened. Import prices on a CFR India basis were heard to have edged up by U.S.$10 per ton from the previous week. The other Group I grades were under downward pressure given lackluster buying interest and plentiful offers.
Group II and Group III prices were described as steady, with muted buying interest exerting pressure on prices given uncertain prospects in downstream lubricant segments. However, suppliers preferred to focus on term shipments, keep pricing unchanged, and wait for further developments as lower values did not necessarily spur additional spot orders.
In terms of shipments to India, about 2,000-3,000 tons of base oils were discussed for shipment from Thailand to West Coast India/United Arab Emirates between December 20 and 30. Another 5,000-7,000 tons were mentioned for lifting in Port Klang, Malaysia, to Mumbai and Kandla in late December. A 3,000-ton cargo was quoted for shipment from Rayong, Thailand, to Mumbai in mid-December.
There were also several other cargoes being discussed for intra-regional business, with about 1,700 tons mentioned for shipment from Singapore to Godau, Vietnam, between December 1 and 10. A 3,000-ton lot was expected to be shipped from Sriracha, Thailand, to Chittagong, Bangladesh, in late December. Between 3,000 and 5,000 tons were anticipated to be lifted in Yeosu, South Korea, to Merak, Indonesia, mid-December. A 3,200-ton parcel was discussed for shipment from Onsan to Singapore in December. A 1,300-ton lot was mentioned for possible shipment from Onsan to Bangkok, Thailand, this month as well.
Crude
Crude oil futures extended losses after Saudi Arabia reduced its crude prices for Asia by more than expected due to subdued demand. OPEC+ has also postponed the crude oil output hike that was scheduled to start in January 2025 because of global oil demand concerns.
On December 9, Brent February 2025 futures were trading at $71.47 per barrel on the London-based ICE Futures Europe exchange, from $71.84/bbl on December 2.
Dubai front month crude oil (Platts) financial futures for January 2025 settled at $70.45 per barrel on the CME on December 6, compared to $71.35/bbl for December futures on November 29.
Prices
Spot base oil prices were assessed as steady-to-firm, with some of the heavy-viscosity grades inching up as buyers appeared anxious to secure cargoes and suppliers had limited availabilities. 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 steady-to-firm. The Group I solvent neutral 150 grade was hovering at $780-820/t, and the SN500 was heard at $1,030-1,070/t. Bright stock prices edged up by $10/t to $1,320-1,360/t, all ex-tank Singapore.
Prices for the Group II 150 neutral were at $850-890/t, but the 500N was adjusted up by $10/t to $1,060-1,100/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $650-690/t, and the SN500 was holding at $910-950/t. Bright stock prices moved up by $10/t to $1,120-1,160/t, FOB Asia on snug supply.
The Group II 150N was unchanged week on week at $700-740/t FOB Asia, and the 500N was also steady at $920-960/t FOB Asia.
In the Group III segment, the 4 cSt grade was unchanged at $1,030-1,070/t, and the 6 cSt was holding at $1,060-1,100/t. The 8 cSt cut was hovering at $960-1,000/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.