In China, aside from serious internal financial issues affecting segments such as real estate and construction, the ongoing trade dispute with the U.S. president was expected to have a significant impact on economic growth prospects and trade relations. The tariffs may prompt companies that were producing goods in China for export to the U.S. to move their plants closer to their U.S. customers and establish factories in Mexico, Central and South America instead, as freight rates would likely be lower.

Trump imposed a 10% tariff on all Chinese imports as of Feb. 1, and China, in turn, will be applying levies on U.S. goods, with American coal and liquefied natural gas subject to 15% tariffs, and crude oil, farm equipment and large engine vehicles seeing a 10% levy.

The U.S. president also announced tariffs of 25% on all steel and aluminum imports on top of existing duties on metals, regardless of their origin, and has talked about imposing additional tariffs on imports from the European Union – a move that was likely to upend current trade patterns and raise prices for most goods. The increased cost of steel and aluminum in particular could impact the oil industry since these materials are essential for building and maintaining infrastructure for oil extraction and refining.

Aside from general economic and financial concerns affecting demand for lubricants and finished products, Chinese base oil consumers worried about the availability of API Group I cuts, with bright stock attracting a fair amount of attention as this grade is difficult to replace and cargoes were hard to locate. Regional Group I supplies have dwindled given permanent plant closures and turnarounds, with supplies from Southeast Asia being strained by maintenance programs and robust domestic demand, as well as buying interest from neighboring countries.

Chinese buyers appeared willing to up their bids in order to secure cargoes from Southeast Asia as they had to compete with other consumers in the region. The light-viscosity grades were more readily available since capacity for these cuts is more ample in China, but demand for the heavy-viscosity cuts from the industrial, marine, railway and heavy-duty segments continued unabated, although ongoing uncertainties in downstream markets were seemingly dampening requirements.

The price of bright stock and other Group I heavy viscosity grades has been adjusted up by local suppliers and distributors in China as availability remained snug, and their price ideas were further supported by climbing import prices.

The Group II base oils were similarly affected by current conditions in China, but there was more availability of domestic supplies because of an increase in domestic Group II production in recent years. However, just like the Group I segment, the Group II grades will see a tightening due to turnarounds during the next few weeks when plants undergo seasonal maintenance.

With South Korean producer GS Caltex starting a turnaround later this month, there were expectations of reduced Group II supply from that country, with offers rising as a result. There were reports that Chinese buyers had turned to Taiwan for additional cargoes beyond those acquired under contract, and prices have also climbed for March shipments.

In the Group III category, there was a pick-up in demand as buying had been subdued in the previous weeks due to national Lunar New Year holidays, and buyers have returned to the market to replenish stocks. Supplies in this segment may also be affected by seasonal turnarounds or reduced run rates at Chinese Group III plants, but buyers appeared less concerned given alternative sources of Group III cuts from Asia and the Middle East. However, planned turnarounds in South Korea and the Middle East over the next few months could also lead to tighter conditions.

Discussions centered on some shipments to China from the Middle East, including a 2,500-metric-ton parcel that was expected to ship from Ras Al Khaimah, United Arab Emirates, in early Feb.

In India, base oil import prices have edged up because of tightening supplies and an uptick in demand. While Indian consumers have started to move away from imports as much as possible since domestic base oil capacity has increased and has become more reliable, there was still a deficit of certain grades.

Imports of Group I solvent neutral 150 have inched up by $5/t from the previous week on a CFR India basis, while bright stock has seen more significant gains of $10/t to $15/t because of more limited supplies.

The Group II grades were also exposed to upward pressure due to tightening regional supply – particularly from South Korea – with CFR India indications moving up by $5/t to $15/t and the heavy viscosity grade seeing the steeper increases.

The higher prices were partly supported by an uptick in buying interest as some buyers have depleted their stocks and were eager to replenish them ahead of the end of the fiscal year on March 31. Additionally, maintenance work at two domestic plants in the coming weeks was also expected to reduce the availability of most Group I and Group II base oils. Suppliers were monitoring their supplies as they wanted to ensure term demand was met and were restricting spot availability.

Group III offers have also edged up as suppliers did not seem pressured to place product in India because of opportunities in other countries where prices were more attractive. At the same time, availability of most grades encouraged Indian buyers to resist the higher values being presented.

A number of various base oil grades were under discussion for shipment to India, including a 3,000-4,000-ton lot expected to be shipped from South Korea to West Coast India in March. About 60,000 tons to 70,000 tons were on the table for shipment from Onsan, South Korea, to Mumbai and Kandla in the first half of March. A 5,000-ton parcel was also quoted for shipment from Onsan to Mumbai in the second half of Feb.

Additional South Korean cargoes were also mentioned, with a 3,300-ton parcel expected to be shipped from Onsan to Hamriyah, United Arab Emirates, in late Feb. A 1,000-ton cargo was likely to be lifted in Yeosu to Taichung, Taiwan, in the first half of March. A 700-ton parcel was expected to be shipped from Onsan to Haiphong, Vietnam, in late Feb. A 2,100-ton lot was discussed for shipment from Ulsan to Karachi, Pakistan, in the first week of April.

The overall base oil supply and demand balance may become more strained in Asia in the coming months, as a string of permanent plant closures and maintenance programs will reduce availability.

In the Group I segment, PetroChina’s Dalian Petrochemical Group I plant in Liaoning province was shut down permanently in late 2024 due to the expected closure of the associated refinery in mid 2025 for its relocation. At the same time, there had been expectations that China National Petroleum Corporation/PetroChina’s Fushun plant, also located in Liaoning, would be producing additional Group I base oils that would likely help offset the Dalian closure, market sources said. Fushun has not yet confirmed the Group I volume it will bring online, but earlier estimates had put the Group I bright stock expansion at 60,000 tons per year. Fushun was expected to have a six to eight-week turnaround in late Q2 or early Q3 2025, according to sources.

In Indonesia, the Pertamina Group I plant in Cilacap was expected to undergo maintenance work from mid January until late February, according to reports. This has constrained the volumes available for export from this facility.

In Japan, 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, with a restart expected last 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 in September 2024 and was completed at end of the year. Eneos also plans to complete maintenance at its Kainan and Mizushima plants this year. The Mizushima B plant will be shut down this month for an extended turnaround that will last until May. All of these shutdowns come on the heels of the permanent closure of two Eneos Group I plants over the last three years.

Another outage that was expected to have some impact was the 10-day turnaround at the IRPC Group I plant in Thailand in May, and preparations for the shutdown may coincide with a seasonal demand increase. While the producer was likely to build inventories ahead of the outage to meet term obligations, it was likely to prioritize domestic commitments and reduce volumes offered for spot business.

In India, Hindustan Petroleum Corp. Ltd. was expected to start a partial Group I turnaround this month that may last until April.

Further down the road, it was heard that Thai Lube Base Oil PLC may be shutting down a lube base oil production unit from early July until mid-August.

Within the Group II segment, a number of turnarounds may also result in tight supply of certain grades. In China, an unplanned outage at the CNOOC Group II unit in Huizhou might impact availability in the domestic market.

Also in China, Sinopec was understood to have scheduled a two-month turnaround at its Gaoqiao Group I and Group II plant to commence in March.

There were also reports that South Korean producer GS Caltex was preparing for a forty-five day turnaround at its Group II/Group III plant in Yeosu, starting later this month, and was building inventories to cover term commitments during the outage.

Later this year, ExxonMobil hopes to bring additional Group II capacity on line at its Singapore Resid Upgrade Project. The company plans to produce over one million tons per year of Group II high-performance base stocks and will be launching a similar product to Group I bright stock, but within the Group II family, marketed under the brand name EHC340 Max. The upgrade project will also allow the company to offer additional supplies of the EHC 50 base stock and introduce the EHC 120 cut to the Asia Pacific region.

In the Group III segment, SK Enmove will also be completing a partial turnaround at its Ulsan, South Korea, Group III plant for two months, starting in May, but the shutdown was not expected to have a significant impact on supplies because of uninterrupted production on the facility’s other trains, company sources said.

In the Middle East, Bapco was heard to have scheduled a 45-day turnaround at its Group III facilities in Sitra, Bahrain, starting in March.

Luberef will also be shutting down its Group I and Group II units in Yanbu, Saudi Arabia, for maintenance in the second or third quarter.

Prices

Crude oil futures extended a downward streak that started last week on Trump’s promise to boost U.S. oil output and on increased talk about a potential end to the Russian war on Ukraine. A peace deal could lead to Western sanctions on Russia being lifted, which would, in turn, allow for more Russian oil to trade in international markets. Concerns over a global economic slowdown driven by the U.S. leader’s tariffs offensive also weighed on oil prices, according to analysts.

On Feb. 17, Brent April 2025 futures traded at $75.14 per barrel on the London-based ICE Futures Europe exchange, from $75.51/bbl on Feb. 10.

Dubai front month crude oil (Platts) financial futures for March 2025 settled at $74.68/bbl on the CME on Feb. 14, compared with $74.92/bbl on Feb. 7.

Spot base oil prices were steady to firm this week and continued to be swayed by supply and demand factors. 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 generally stable to firm from a week ago. Group I solvent neutral 150 was unchanged at $780/t-820/t and SN500 also held steady at $1,040/t-1,080/t, while bright stock was assessed at $1,340/t-1,380/t. Ex-tank Singapore prices for Group II 150 neutral were hovering at $840/t-880/t, but the 500N edged up by $10/t to $1,070-1,110/t.

On an FOB Asia basis, Group I SN150 held at $650/t-690/t and SN500 hovered at $890/t-930/t. Bright stock prices jumped by $20/t to $1,190/t-1,230/t, FOB Asia on limited supplies.

The Group II 150N was steady at $710/t-750/t FOB Asia, while 500N edged up by $10/t to $940-990/t FOB Asia.

In the Group III segment, the 4 cSt grade was heard at $1,020/t-1,060/t and 6 cSt was assessed at $1,050/t-1,090/t. The 8 cSt cut was holding at $950/t-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.