Concerns about downstream lubricant market performance, climbing feedstock prices and approaching holidays dampened activity in Asia, although buying interest for API Group I cuts remained robust. Some buyers started to replenish stocks on speculation that prices may increase if crude continues continues rising. Potential turmoil in trade patterns as United States president-elect Donald Trump threatened to impose steeper tariffs on all imports, and fresh U.S. sanctions on Russian crude oil exports and shipping also impacted sentiment.
China recorded significant export growth to the U.S. in December, as companies continued front-loading orders as they prepared for potential higher tariffs once Trump takes office on January 20.
At the same time, Lunar New Year celebrations, which start at the end of the month, slowed trading in China and other nations that observe the holiday because some shipments may not arrive until after the festive period as production and logistics wind down and may even be halted for a few days.
Chinese refiners have to prepare for the impact of these new Russia sanctions. Many took advantage of cheap Russian oil, but after shipments are curtailed they face the choice of steeper feedstock or reducing operating rates.
Chinese blenders seemed to meet most of their requirements with existing stocks and were therefore less eager to purchase additional base oil volumes. Even so, interest in Group I grades – bright stock in particular – was healthy because of steady demand and expectations that the market would tighten in a few weeks given permanent plant closures and a number of upcoming refinery turnarounds in the region. Bright stock availability has been strained since last year and prices continued to be exposed to upward pressure.
The permanent closure of PetroChina’s Dalian Petrochemical Group I plant in late 2024 for relocation tightened the supply/demand balance, sending buyers to look for alternative sources of supply. At the same time, the Group I expansion at PetroChina’s Fushun plant, which was expected to bring additional Group I capacity of 330,000 metric tons per year on stream in 2024, should help relieve some of the tightness, although the expansion was unconfirmed.
In Indonesia, the Pertamina Group I plant in Cilacap would be undergoing maintenance work this month and reduce output, according to reports. This might exacerbate an already tight supply and demand scenario in the region.
In Japan, two Eneos plants were permanently closed over the last three years. Tight Group I conditions persisted after the extended shutdown of Idemitsu Kosan’s Group I unit in Chiba following a fire at the lubricating oil production facility in mid-2024. The unit was expected to have been restarted at the end of December. This plant has been scheduled for a turnaround in May. A Cosmo Oil unit in Yokkaichi, Japan, underwent an extended maintenance program which began last September and was completed at end of 2024. Eneos also plans to complete maintenance at its Kainan and Mizushima plants this year.
Moving into the second quarter, the IRPC Group I plant in Thailand will be undergoing a turnaround in 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, and the producer will also likely prioritize domestic commitments. A 2,000-ton to 3,000-ton cargo was quoted for shipment from Thailand to the United Arab Emirates at the end of January. There was speculation that this may have involved a tender recently offered by a Thai Group I producer.
There was ample Group II availability for most grades, although the 150 neutral cut was slightly snug, supporting firm price ideas. Rising crude oil and feedstock prices prompted suppliers to raise offers, but buyers resisted the higher pricing as current availability was deemed more than adequate to cover requirements.
At the same time, climbing feedstock and fuel prices may encourage refiners to produce more fuels and reduce base oil output, leading to a tighter supply and demand scenario. A South Korean refiner was heard to have increased gasoil production in detriment to base oil output. Producers such as Formosa Petrochemical in Taiwan may be affected by the changing output considerations as well, but the Group II producer was still heard to be actively exporting Group II grades. A prompt 2,000-ton cargo was quoted for shipment from Mailiao, Taiwan, to Hamriyah, UAE, and a 1,500-ton parcel was discussed for lifting in Mailiao to Singapore in the second half of January. A 4,000-ton lot was mentioned for shipment from Mailiao to Chittagong, Bangladesh, between February 5 and 10. An additional 4,000-ton cargo was discussed for shipment to Chittagong from South Korea between February 10 and 20.
In countries such as India, some of the pressure for buyers to jump at the first offer they received was alleviated by the opportunity to import Group II cuts from origins such as the U.S., where suppliers had adjusted export prices down to promote sales. Some shipments from the U.S., as well as from Northeast Asia, Southeast Asia and the Middle East were expected to reach Indian shores in the coming weeks.
A 2,000-ton lot was mentioned for possible shipment from Pyeongtaek, South Korea, to Chennai between January 10 and 20. About 4,000-5,000 tons were expected to be shipped from Ruwais, UAE, to Kandla at the end of January. About 40,000 tons of easy chems and base oils were heard to have been shipped from South Korea to West Coast India on the Maritime Comity in early December.
As with their Chinese colleagues, Indian refiners have made base oil while the sun shined with discount Russian crude leaving them with a similar quandary of securing cargoes elsewhere at higher prices or cutting output. This could place pressure on base oil values as well. Yet India will be hit the harder than China since it imports more oil from Russia. The country imports 88% of its oil needs, with around 40% of that coming from Russian companies.
For the time being, buyers in India preferred to wait for further developments before venturing out for additional base oil imports, particularly as import prices have increased given the depreciation of the local currency against the U.S. dollar. Consumers’ inventories were expected to be sufficient to meet immediate product needs, while the availability of domestic base stocks with shorter lead times and competitive pricing also provided some reassurance.
A scheduled plant turnaround may also affect the Group II supply and demand balance in the region over the next couple of months. South Korean producer GS Caltex was reported to be preparing for 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, likely tightening spot availability in Asia in the first quarter.
Additionally, there were reports that the Hyundai Oilbank/Shell Group II base oil unit in Daesan, South Korea, had run at reduced rates for several days due to a fire at the refinery in late December. Operating rates were expected to have increased in early January, but there was no producer confirmation available.
In China, the CNOCC Group II plant in Huizhou was heard to be ramping up production after an unexpected shutdown in late 2024.
There was also ample Group III availability in the region, with demand holding at steady levels and prices receiving some support from rising crude oil and feedstock values. At the same time, increased Group III domestic capacity in China was placing downward pressure on price indications in that country and reducing the need for imports. Demand for Group III in India was stable, but not particularly buoyant.
Reports circulated that SK Enmove would be completing a partial turnaround at its Ulsan, South Korea, Group III plant for two months, starting in May, which should partly curtail Group III availability in the region.
In related market news, Japanese automakers such as Toyota are hoping to secure the support of Thai lawmakers to turn the country into a production and development hub for hybrid cars, “seeking to seize an opportunity in what is known as Asia’s Detroit,” Nikkei Asia reported this week. This was anticipated to bring added attention to the supply of raw materials for automotive manufacturing operations and likely increase the consumption of high performance base oils and lubricants in that country.
Prices
Crude oil futures slipped on Monday on expectations that Trump would be relaxing sanctions on Russia’s energy exports in exchange for a deal to end the war on Ukraine, easing concerns about crude supply shortages. At the same time, higher freight rates for crude shipments on unencumbered vessels were expected to continue to impact oil prices and other refined products.
On January 20, Brent March 2025 futures were trading at $80.53 per barrel on the London-based ICE Futures Europe exchange, from $81.33/bbl on January 13 and $76.10/bbl on January 6.
Dubai front month crude oil (Platts) financial futures for February 2025 settled at $80.75 per barrel on the CME on January 17, compared to $78.85/bbl on January 10.
Spot base oil prices were assessed as steady to firm, but trading remained muted. 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 slightly higher from a week ago. The Group I solvent neutral 150 grade was assessed up by $10/t at $770-$810/t, and the SN500 was also up by $10/t at $1,040-$1,080/t on tight regional availability. Bright stock prices were firm at $1,320-$1,360/t, all ex-tank Singapore.
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 assessed higher by $10/t at $640-$680/t on increased buying interest and steeper feedstock prices, but the SN500 was holding at $910-$950/t. Bright stock prices edged up by $10/t to $1,130-$1,170/t, FOB Asia on snug supply.
Group II 150N was steady at $690-$730/t FOB Asia, while 500N was unchanged at $920-$970/t FOB Asia.
In the Group III segment, 4 cSt held at $1,020-$1,060/t and 6 cSt was also steady at $1,050-$1,090/t. The 8 cSt cut was 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.