The festive season dampened market activity, although some players rushed to finalize business before the festivities as they strove to lower inventories for tax purposes, a few wrapped up contract discussions, and others tried to replenish stocks ahead of plant turnarounds scheduled over the next few weeks. Seasonal demand decline and falling crude oil and feedstock values put pressure on base oil price ideas, but figures remained generally steady from a week ago.
Most buyer anxiety stemmed from expectations that supplies of API Group I base oils would be strained when a Thai plant started a turnaround and other units in Japan underwent scheduled maintenance programs in 2025. These shutdowns will likely exacerbate an already tight Group I supply and demand scenario due to plant rationalizations over the last few years.
A Japanese Group I unit has been off line since the middle of the year because of a fire is due to restart at the end of the month. A second unit was undergoing an extended maintenance program that began in late September and was expected to be completed this month as well. Eneos also planned several turnarounds at its plants in Japan next year.
In Thailand, the IRPC Group I plant was heard to have been scheduled for a turnaround in the first quarter of 2025. The shutdown 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. This situation has already given a boost to Group I prices and fueled concerns about possible shortages, particularly of bright stock.
Additionally, the permanent closure of Dalian Petrochemical’s Group I plant in China before the end of the year, and of the affiliated refinery by mid-2025, might also lead to a slight product tightening in that country.
As a result, there was an uptick in buying interest for both domestic Group I grades in China, as well as imports, and this drove prices for some grades up. At the same time, recent offers of Chinese Group I export volumes at competitive levels put pressure on regional price ideas.
Chinese buyers were also bracing for an activity slowdown at the end of January during the Lunar New Year holidays, when logistics and transportation may see disruptions. They have therefore lined up some base oil deliveries for earlier in the month to manufacture finished products that may see a demand uptick ahead of the holidays.
The Group II heavy-viscosity base oils had also experienced slightly strained conditions, in part because the sole Taiwanese Group II producer, Formosa Petrochemical, reduced operating rates of Group II 500N due to refinery economics in the previous weeks. Production was heard to have returned to normal levels though. Taiwan used to export a large portion of its output for spot business to China, but the situation has changed since June because of the Chinese government’s reimposition of tariffs on refined products.
This led Chinese consumers to turn to domestic Group II supplies, which have coincidentally increased given additional Chinese capacity coming on stream during the last decade. However, unexpected issues at CNOOC’s plant in Huizhou could put a dent in Group II availabilities.
A South Korean producer has also started to prepare for a turnaround in the first quarter of 2025 and has limited spot offers of Group II and Group III grades as it builds inventories to meet term obligations during the outage. It was heard GS Caltex is planning to idle its Group II/III plant in Yeosu next March, and this was likely to affect spot availability of Group II and Group III grades in the region.
Group III prices were generally steady-to-soft in China, as local producers continued trying to maintain or gain market share against imports. A Group III producer in China has extended a turnaround that was supposed to wrap up earlier this month, and this could affect overall supply levels.
Most suppliers in the region worked to maintain prices, since lowering values didn’t bump up orders. Even the lowest prices wouldn’t reverse the seasonal demand slowdown. There was also speculation that some refiners adjusted down operating rates to keep inventories from building and were therefore able to maintain more balanced positions with less pressure to place additional volumes.
Meanwhile in India, base oil prices remained exposed to downward pressure given lackluster buying interest and ample domestic inventories. Indian buyers felt more confident that additional volumes might become available from local suppliers and were relying less heavily on imports. Prices for imported Group I and Group II cargoes have therefore lost territory, with week-on-week downward adjustments of about $5-10 per metric ton on a CFR India basis heard discussed.
While there was some regional concern about potential Group I base oil shortages in the first quarter of 2025, stable domestic production of Group I grades in India and availability of competitively priced cargoes from the Middle East assuaged some of these concerns.
Group II cuts also saw downward pressure because of attractive offers of U.S. cargos, as U.S. suppliers lowered inventories built up during the Atlantic hurricane season. There were expectations of several cargoes moving to India in January and February, although volumes might be lower than in previous years because of an unexpected shutdown at the Excel Paralubes Group II plant in Louisiana in November/December. The producer was forced to suspend spot offers and was heard to have cancelled some export commitments due to the unplanned production outage.
The Group III segment was fairly muted in India, with existing inventories deemed adequate to meet demand and the availability of imports offering peace of mind to those buyers who needed to replenish stocks in January.
Prices
Crude oil futures finished last week lower on ongoing worries about demand growth in 2025, especially in top crude importer China, and a strong dollar, but inched up on Monday after U.S. data showed cooling inflation, giving market observers revived hope of further interest rate cuts next year, potentially leading to global economic growth and increased oil consumption.
On December 23, Brent February 2025 futures traded at $73.21 per barrel on the London-based ICE Futures Europe exchange, from $74.21/bbl on December 16.
Dubai front month crude oil (Platts) financial futures for January 2025 settled at $72.55 per barrel on the CME on December 20, compared to $73.91/bbl on December 13.
Spot base oil prices were assessed as steady-to-soft, with lighter grades losing ground due to 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 from a week ago. Group I solvent neutral 150 was heard at $770-810/t and 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 slightly lower by $10/t at $840-880/t, but 500N was unchanged at $1,060-1,100/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 hovered at $640-680/t and SN500 held at $910-950/t. Bright stock prices were unchanged at $1,120-1,160/t, FOB Asia on snug supply.
Group II 150N was steady at $690-730/t FOB Asia and 500N held at $920-960/t FOB Asia.
In the Group III segment, the 4 cSt grade was unchanged at $1,030-1,070/t and 6 cSt was assessed at $1,060-1,100/t. The 8 cSt cut also held at $950-990/t after a small downward revision last week.
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.