The situation surrounding the Suez Canal might not affect Asian base oil shipments directly but could offer fresh opportunities for Asian exports – particularly of API Group III base oils – if Middle Eastern material faces significant delays and higher costs in reaching destinations such as the United States.

It has also had an impact on crude oil prices, with futures climbing on Monday and Tuesday after several weeks of edging down as the shipping disruptions raised the geopolitical risk premium on oil prices. Oil futures then fell on Thursday as concerns over low demand following reports of a surprise U.S. crude inventory build outweighed worries over the latest trade disruptions in the Middle East.

On Thursday, Dec. 21, Brent February 2024 crude futures were trading at $79.33 per barrel on the London-based ICE Futures Europe exchange, from $76.62/bbl on Dec. 14.

Dubai front month crude oil (Platts) financial futures for January 2024 settled at $78.99 per barrel on the CME on Dec. 20, from $73.16/bbl on Dec. 13.

While crude oil prices strengthened this week, the recent price decline had been exerting downward pressure on base oils, and this, coupled with lengthening supplies, had led to spot prices of several grades moving down.

The Group I cuts seemed to be shielded from significant decreases because supply was not as abundant as for other grades and demand has remained fairly steady, although bright stock saw a small slump given seasonal patterns and reduced use of heavy grades during the cold winter months.

Group II availability, on the other hand, was plentiful, and aside from regional cargoes, there were attractive offers of U.S. material, which were mainly directed to India.

With the Taiwanese Group II producer, Formosa Petrochemical, restarting its plant in Mailiao in early December, following a two-month turnaround, there were expectations that more Group II grades would become available, and this also placed some pressure on Group II values.

There have been several Group II and Group III cargoes discussed for shipment from South Korea to destinations in Asia this week, including a 1,800-metric ton lot made up of two grades for prompt to end December loading in Onsan to Bangkok, Thailand. About 6,000 tons to 10,000 tons were being considered for shipment from Ulsan, Yeosu or Mailiao, Taiwan, to Mumbai and Jebel Ali or Hamriyah, United Arab Emirates, in mid to late January. Conversely, a 1,800-ton cargo made up of two grades was expected to be shipped from Mizushima, Japan, to Ulsan in mid January.

In India, a number of Group II cargoes were expected to arrive from the United States this month and the next. U.S. suppliers focus on reducing inventories at the end of the year, and typically lower export prices to entice deep-sea receivers to take additional cargoes.

In terms of Group I grades, local production in India was deemed plentiful to cover most requirements and prices were considered competitive. There were also expectations that new Group III production coming on stream in India would meet some of the emerging requirements for premium base oils in automotive applications. Imports of several grades from Europe have also started to be discussed, with a 6,000-ton cargo quoted for shipment from Antwerp, Belgium, to Mumbai and/or Hazira in late January.

In China, lackluster economic growth and the deadliest earthquake in decades, which struck Ganzu province amid freezing temperatures this week, have had a somber impact on market sentiment. Most buyers preferred to rely on domestic product, rather than purchasing imports, although some grades are typically scarce in China and blenders have no choice but to use imported material. For instance, about 5,200-tons were heard discussed for shipment from Singapore to Taicang the last week of December.

Demand for base oils and lubricants was expected to pick up again in China ahead of the Lunar New Year celebrations, which start on Feb. 10 next year, as lubricant manufacturers start to build inventories ahead of the festivities.

Group III base oil supplies remained ample in Asia but may see some tightening in the first quarter of next year as Petronas planned to start a two-month turnaround at its plant in Malacca, Malaysia, in January, and SK Enmove has also scheduled a one-month turnaround at its Group III plant in Ulsan, South Korea, in the first quarter of 2024.

Base oil spot prices were steady to softer in Asia this week, depending on 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 steady to lower from the previous week. The Group I solvent neutral 150 grade was heard at $870/t-$910/t, and the SN500 was unchanged at $990/t-$1,020/t. Bright stock was holding at $1,180/t-$1,220/t, all ex-tank Singapore.

Prices for the Group II 150 neutral were lower by $10/t at $960/t-$900/t, and the 500N also edged down by $10/t to $1,000/t-$1,040/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was lower by $10/t at $770/t-$810/t, and the SN500 slipped by $10/t as well to $880/t-$910/t. Bright stock prices were slightly lower as well by $10/t at $990/t-1,030/t, FOB Asia.

The Group II 150N was steady at $800/t-$840/t FOB Asia, but the 500N slipped by $10/t to $810/t-$840/t FOB Asia.

In the Group III segment, 4 centiStoke, 6 cSt and 8 cSt prices were assessed lower compared to the previous week. The 4 cSt was assessed down by $10/t at $1,190-$1,220/t, and the 6 cSt was adjusted down by $10/t as well to $1,170/t-$1,210/t. The 8 cSt grade was also down by $10/t at $930-$970/t. All indications are FOB Asia for fully approved product.

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.