Base oil and lubricant activity was expected to pick up in Asia over the next few days as participants return to business following year-end festivities and temporary closings, although demand was not anticipated to improve in earnest until March or April. Some manufacturing facilities shut down for a few days over the New Year holidays and utilized the time for maintenance and cleaning, while others assessed inventories and upcoming product needs.
In China, buyers were anticipated to replenish stocks ahead and after the Lunar New Year holidays that start on January 29. The country mostly shuts down for a week, and blenders were likely preparing for an uptick in motor oil consumption as millions of people take to the road to visit family and their hometowns. Suppliers to the heavy duty and transportation segments were also preparing for increased lubricant consumption ahead of the holiday, followed by a week of reduced activity, and then another small peak that would gradually grow with the approach of the spring season.
While most base oils were readily available in China and prices were generally stable, there has been some concern regarding the availability of API Group I grades – bright stock in particular – which see strong demand from the marine, railway and heavy-duty transportation segments, as well as from industrial applications. The Group I cuts have experienced strained regional conditions because of ongoing and upcoming Group I plant shutdowns, and buyers were on the lookout for these grades to ensure their supply needs would be met. There appeared to be adequate availability of imported Group I grades, as well as domestic products for the time being.
Closure of Dalian Petrochemical’s Group I plant in China in late 2024, and of the affiliated refinery by mid 2025, might result in a further base stock tightening. China has increased capacity of Group II and Group III grades over the last ten years, but with the exception of a Group I expansion at PetroChina’s Fushun plant – which reportedly brought expanded Group I capacity of 330,000 metric tons per year on stream in Q3 2024 – many Group I plants have been shuttered due to market economics and environmental concerns. An unexpected shutdown at the CNOOC Huizhou plant also triggered expectations of tightening supplies, but the unit was heard to have resumed production.
China imports Group I base oils from various sources, with Thailand being a regular supplier. The IRPC Group I plant in Thailand was heard to be preparing for turnaround in the second quarter. The turnaround was originally reported to have been scheduled for the first quarter of 2025, but it won’t until May. While the producer was likely to build inventories ahead of the shutdown to meet term commitments, it may not be able to offer spot shipments.
There were also reports that the Pertamina Group I plant in Cilacap, Indonesia, would undergo maintenance work this month. This might exacerbate an already tight supply and demand scenario in the region, caused by the permanent closure of a number of Group I facilities, ongoing shutdowns and robust demand. Indeed, bulk offers of Group I grades were almost non-existent within the region.
Another country that has seen recent Group I closures is Japan. Aside from the permanent shutdown of two Eneos plants over the last three years, another Japanese supplier’s Group I unit was off-line for an extended period starting in mid 2024 because of a refinery fire, but was expected to have been restarted at the end of December. A second unit in Japan underwent an extended maintenance program, which began in late September that was to be completed by the end of 2024 as well. Eneos has also planned several turnarounds at its plants in Japan this year and plans to transform its shuttered refinery in Wakayama to produce renewable fuels, starting in 2026.
In India, Group I grades were also deemed on the tight side, but buyers were able to secure cargoes from domestic suppliers and from the Middle East. In contrast with other markets in Asia, availability of bright stock has improved, placing some pressure on prices.
Domestic producers shut down plants for maintenance earlier in 2024, but were running plants at optimal rates and have adjusted prices down to offer a competitive option against imports. They have been able to do so as they can import discounted Russian crude oil, which has been subjected to bans and sanctions in other countries. However, India’s crude oil imports from Russia dropped 55% in November to their lowest level since June 2022. Russia still remains the largest supplier of oil to India, followed by Iraq and Saudi Arabia, according to reports by the news agency PTI.
India’s supply of Group II grades appeared well-balanced against demand. India typically enjoys opportunities to secure plentiful Group II imports from regional suppliers in South Korea and Taiwan, and from more distant sources such as the U.S., aside from being able to count on domestic Group II production. There were a number of cargoes heard to have been finalized for shipment from the U.S. in January and February, and several parcels were also lined up from South Korea, Singapore and the Middle East during December, with additional details emerging during the week.
About 4,000 metric tons were lifted in Ulsan, South Korea, for Mumbai in mid December. A 15,000 lot was heard concluded from Yanbu, Saudi Arabia, to Mumbai between December 15 and 20, with another 4,000 tons covering the same route on similar dates. A 5,000-ton cargo was expected to have been shipped from Singapore to Mumbai in late December. About 20,000 tons were booked from Onsan to Mumbai and Jawaharlal Nehru Port Trust (JNPT) between December 10-15. A 3,000-ton lot was mentioned for lifting in Kuwait to JNPT between December 15-20. A 15,000-ton to 20,000-ton lot was quoted for shipment from Ulsan to Mumbai and Hazira in mid December as well.
India’s economy seems to continue steadily growing with an expanding middle class, supporting a year-on-year increase in sales of passenger cars of 4.4% in November 2024, according to a report by Marklines.com. Car sales also rose for the third straight month in December, reaching a record 4.3 million vehicles, India’s The Economic Times reported.
“Festive season demand and new launches helped boost sales. Despite challenges in the commercial vehicle segment, companies remain optimistic about the future,” the news outlet added. Increased domestic production of passenger vehicles will likely lead to an increase in premium base oil and lubricant consumption.
Group III supply and demand was deemed fairly balanced in India, with buyers having many options to choose from, including imports from Northeast and Southeast Asia and the Middle East.
However, Group II/III spot availability may tighten in Asia in the first quarter as South Korean producer GS Caltex was reported to have scheduled a turnaround at its Group II/III plant in Yeosu and has started to build inventories to cover term commitments during the outage. The turnaround was anticipated to start in early March and be completed by mid-April.
There were also reports that the Hyundai Oilbank/Shell Group II base oil unit in Daesan, South Korea, was running at reduced rates due to a fire at the refinery in late December, and this may lead to tighter availability in the region. Operating rates were expected to be increased in early January. China regularly imports Group II grades from this location.
Prices
Crude oil futures slipped in early trading on Monday, but colder weather in the U.S. and Europe had helped lift benchmarks to the highest level since mid-October late last week. Speculation that the incoming Trump administration in the U.S. would tighten sanctions on Iran’s oil exports also supported prices. Additional economic stimulus in China was also expected to boost fuel demand in the world’s largest crude importer.
On January 6, Brent March 2025 futures traded at $76.10 per barrel on the London-based ICE Futures Europe exchange, from $73.89/bbl for February futures on December 30.
Dubai front month crude oil (Platts) financial futures for February 2025 settled at $75.99 per barrel on the CME on January 3, compared to $73.72/bbl for January futures on December 27.
Spot base oil prices were assessed as largely steady as trading remained subdued, with the lighter grades still exposed to downward pressure because of more plentiful supply. 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 from a week ago. The Group I solvent neutral 150 grade was assessed at $770-810/t, and the SN500 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 hovering at $840-880/t, and the 500N was unchanged at $1,060-1,100/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was stable at $640-680/t, and the SN500 was also unchanged at $910-950/t. Bright stock prices were hovering at $1,120-1,160/t, FOB Asia on snug supply.
The Group II 150N was steady at $690-730/t FOB Asia, while the 500N was holding at $920-970/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 assessed at $1,060-1,100/t. The 8 cSt cut was also unchanged from a week ago at $950-990/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.