Some base oil grades seem to be experiencing a temporary tightening, leading to buyer anxiety about potential shortages and steeper price ideas, but the light-viscosity cuts remained plentiful and saw some fluctuations during the week. Suppliers held on to hopes that demand would see a resurgence in the first few weeks of the year, especially in China as the country prepares for the Lunar New Year holidays at the end of January. Until then, efforts to lower inventories ahead of December 31 to avoid tax repercussions seemed to be the main driving force behind market activity.
A string of plant turnarounds was expected to curtail the availability of API Group I grades in the region, at a time when demand continued to outpace supplies, particularly of bright stock. Several Group I facilities have been decommissioned in recent years—including two in Japan within the last three years–and this has led to a system-wide tightening of Group I supplies in the region.
Furthermore, a Japanese Group I unit has been off-line since the middle of the year because of a fire, but was anticipated to be restarted before the end of the month. A second unit was undergoing an extended maintenance program which began in late September, which was expected to be completed this month as well. ENEOS has also planned turnarounds at its plants in Japan next year.
Market participants appeared particularly concerned about potential product shortages as a result of a turnaround that will take place at the IRPC Group I plant in Thailand in the first quarter. The turnaround was expected to last for approximately one month 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 and exert upward pressure on prices.
In China, the permanent closure of Dalian Petrochemical’s Group I plant before the end of the year and the affiliated refinery by mid 2025, might also lead to a slight product tightening. There was renewed buying interest in imports of Group I heavy grades as Chinese domestic supply was not deemed sufficient to cover all requirements. Conversely, recent exports of light-viscosity Group I cuts by a Chinese producer have placed pressure on regional price ideas.
In the Group II segment, there has also been a tightening of the heavy-viscosity base oils, partly because the sole Taiwanese Group II producer, Formosa Petrochemical, had reduced operating rates due to refinery economics, curtailing production of the Group II 500N. Production was heard to have returned to normal levels. While Taiwanese exports to China have receded since June given a new tariff regime, the reduced supplies affected the overall supply and demand balance of the region. Many Chinese users have opted for relying more heavily on domestic Group II supplies to avoid supply uncertainties.
Group III prices remained range-bound in China, following several consecutive months of downward adjustments by local producers to gain market share against imports. However, with demand not showing many signs of improving, suppliers have opted for keeping prices largely unchanged as they did not expect consumption to increase, even if they offered price cuts. Additionally, a Group III producer extended a turnaround that was supposed to wrap up earlier this month, and this could affect overall supply levels.
In South Korea, it was heard that GS Caltex was preparing to shut down its Group II/Group III plant in Yeosu for maintenance next March and has started to build inventories to cover commitments during the outage. This was also likely to impact spot availability of Group II and Group III grades over the next few weeks.
These conditions buoyed Group II 500N spot values as other suppliers did not have significant amounts of these grades to offer beyond those under term contracts.
In India, demand has not improved as much as expected following the monsoon season and various religious festivals, perhaps because consumers had built stocks earlier and were still able to run operations on existing inventories. Blenders have also started to use more of the domestically produced base oils, reducing the reliance on imports. Local producers have the advantage of being able to offer base oils at competitive prices because they often refine Russian crude oil, which is available at a discount given international sanctions on Russian exports.
Base oil imports were particularly impacted by the subdued demand at a time when India typically secures large quantities of base oils from the United States and the Middle East. Prices of Group I and Group II grades on a CFR India basis have slipped by $5-10 per metric ton week on week. Bright stock might be the exception, with prices remaining on firm footing given tighter availability. Group III prices were largely unchanged because of more balanced supplies against muted demand.
U.S. suppliers have reduced export prices to entice buyers and reduce inventories that were kept during the hurricane season ahead of year-end tax assessments, but sources indicated that there had been fewer transactions concluded than during the last quarter in previous years. Furthermore, an unexpected shutdown at the Excel Paralubes Group II/Group III plant in the U.S. might also have led to a tightening of domestic supplies and a reduction of available export cargoes. Nevertheless, there were expectations that several U.S. parcels will be arriving in the first two months of the year.
A 5,000-ton cargo was mentioned for shipment from Pascagoula, U.S., to Mumbai and/or Hamriyah, United Arab Emirates, between December 3-15. About 18,000 tons were under discussion for shipment from South Korea and Taiwan to West Coast India, Hamriyah and/or Karachi, Pakistan, in early January.
Other shipments being discussed included a 4,000-metric ton cargo for loading in Pascagoula and discharge in Singapore in the second half of January. A 1,000-ton lot was mentioned for shipment from Yeosu, South Korea, to Merak, Indonesia, in the second half of January. A 5,000-ton parcel was on the table for shipment from Daesan, South Korea, to Dong Nai, Vietnam, at the end of December.
Crude
Crude oil futures fell on Monday as analysts remained cautious ahead of the U.S. Federal Reserve’s policy meeting later this week, but had made large gains last week on the possibility that the U.S. would implement further oil sanctions against Russia, which could significantly tighten markets in the coming year. There had also been some optimism about a potential demand uptick in China – the world’s largest crude importer – after Beijing announced a looser monetary policy to stimulate economic growth in China last week. Additionally, crude production in Libya could be curtailed as one of the country’s main refineries has been shut down after fires broke out at the facility following clashes between local armed groups on Sunday.
On December 16, Brent February 2025 futures were trading at $74.21 per barrel on the London-based ICE Futures Europe exchange, from $71.47/bbl on December 9.
Dubai front month crude oil (Platts) financial futures for January 2025 settled at $73.91 per barrel on the CME on December 13, compared to $70.45/bbl on December 6.
Prices
Spot base oil prices were assessed as steady-to-soft, with the lighter grades losing ground on account of weak demand and growing supplies. 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-soft. The Group I solvent neutral 150 grade slipped by $10/t to $770-810/t, but the SN500 was steady at $1,030-1,070/t. Bright stock prices were firm at $1,320-1,360/t, all ex-tank Singapore, on tight regional supply.
Prices for the Group II 150 neutral were at $850-890/t while 500N was unchanged at $1,060-1,100/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 slipped by $10/t to $640-680/t, but SN500 held at $910-950/t. Bright stock prices hovered at $1,120-1,160/t, FOB Asia on snug supply.
The Group II 150N was lower by $10/t at $690-730/t FOB Asia, but the 500N was 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 slightly lower by $10/t at $950-990/t.
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com.
Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.