Lackluster demand resulted in largely unchanged prices, with downward pressure on some base oil grades, such as the API Group III cuts, and the heavier grades able to hold their ground better than the lighter grades because of increased tightness.

Group I base stock availability remained strained given the more limited plant capacity for these grades in the region, but Southeast Asian countries such as Singapore, Thailand and Indonesia continued to ship some cargoes to other countries such as China. At the same time, these countries also import base oils from China, with shipments moving to Singapore for example, for intra-company lubricant production there, and Thailand heard to have increased imports from South Korea, Singapore, Qatar and Japan during the first half of the year.

A turnaround at an Indonesian Group I plant that was scheduled for October has been delayed, and participants expected improved availability from the supplier over the next couple of months. Several Thai and Indonesian Group I cargoes have become available in recent weeks.

Japan had until recently also been able to offer Group I cargoes to regional destinations, but export shipments are more sporadic now as capacity has been significantly reduced with the permanent closure of a number of base oil plants. Additionally, lubricant shipments from Idemitsu Kosan’s Chiba refinery have been suspended following a fire that broke out at the lubricants production unit on July 2, but other facilities including a crude distillation unit (CDU) had continued to operate after the incident, according to media reports. It was not clear when lubricant shipments would resume, but there were indications that production at the base oils unit would not restart until later this year.

Travel and some industrial activities in Japan have been affected by Typhoon Shanshan, which pummeled southern Japan last Thursday, and a second typhoon over the weekend. The storms caused flooding, landslides and several casualties. Almost a million people were evacuated and many households and factories lost power. Airlines cancelled flights to southern Japan and bullet train services were suspended as well. Japanese automaker Toyota announced that it would pause production at all 14 of its Japan factories, including operations at Toyota’s group companies such as parts manufacturer Aisin, starting Wednesday evening to protect its workers. On Thursday morning, the carmaker said that it would extend the suspension until Friday for all but one of the factories, The New York Times reported. Mazda Motor also announced it would shut two factories in Hiroshima and Yamaguchi prefectures on Thursday and Friday due to safety concerns. Suspension of activities of this magnitude at several auto plants might affect the supply of vehicles and parts and dampen demand for factory-fill lubricants, sources said.

China is still a large importer of Group I base oils, particularly heavy viscosity grades, as the country is structurally short on these cuts. Bright stock always plays an important role for marine, railway, industrial, agricultural and heavy-duty automotive applications and China typically imports large volumes of this grade. However, imports have declined in recent months due to slightly lower demand, high import prices and competitive values from domestic suppliers. A slight uptick in consumption of fuels and lubricants was expected ahead and during the National Day holidays on October 1-7, and sellers remained hopeful that more business would be concluded ahead of the holidays.

The return to production of several Group I and Group II plants in China last month meant that some grades have started to lengthen, opening the opportunity for at least one producer to offer some export cargoes. However, exports from China remained relatively limited as the state-run refineries prioritize the fulfilment of domestic requirements. Growing availability of most grades has led to competitive actions by some producers to gain market share. This was particularly evident in the Group III segment.

Chinese buyers have also been on the lookout for imported light grades and heavy grades as domestic supplies were not deemed sufficient. China used to import large volumes of Taiwanese Group II cargoes, both for contract and spot business, and although the contract shipments continue, volumes have fallen because of import duties levied on Taiwanese refined products.

The sole Taiwanese producer, Formosa Petrochemical, was heard to be running its base oil unit at slightly reduced rates given the lower demand from China, although the producer has been able to place cargoes not only into China, but also into India, Pakistan, the Middle East and Southeast Asia. It was heard that about 2,500 metric tons had been booked for a late September shipment from Mailiao, Taiwan, to Karachi, Pakistan, this week.

In India, prices were generally stable to slightly firmer because of increased buying interest in certain grades. While many requirements are being met by domestic products, given limited supplies of Group I bright stock, this grade has commanded more attention on the import side. Indications on a CFR India basis have edged up by $10 per metric ton to $20/t week on week as a result.

Demand for most grades remained lackluster because of crude oil and feedstock price fluctuations, which have fueled speculation about the possibility that base oil prices would fall in the coming weeks. There was still no clear indication whether base oil and lubricant consumption would improve significantly after the end of the rainy season. For the time being, large areas of the country continued to be affected by heavy rains and flooding, and market activity was not anticipated to pick up in earnest until later this month.

There were reports that Indian Oil Corp. shut down its Group I and Group II units in Haldia in the second half of August for a one-month maintenance program, but direct producer confirmation could not be obtained. The shutdown was not expected to have a significant impact on availability given generally sluggish demand.

Indian buyers did not appear concerned about a lack of supplies, even after the shutdown of a local plant and a turnaround at S-Oil facilities in South Korea from September until October. This was partly attributed to the fact that domestic inventories were plentiful, and supplies were lengthening in the United States, with producers announcing posted price decreases, which Indian participants took as a sign that lower-priced U.S. exports would likely become available in the fourth quarter. India typically receives large quantities of U.S. Group II base oils towards the end of the year, when U.S. producers try to clear inventories they had built up ahead of hurricane season, which ends on November 30.

South Korean offers may also become more plentiful later in the year, as scheduled maintenance programs are expected to be completed. Several shipping inquiries were under discussion this week, including a 10,000-ton lot to be shipped from Pyongtaek to Mumbai, India, in late August-early September. Details emerged of a 16,000-ton lot shipped from Yeosu and Ulsan to Chennai and Mumbai in early August on the Ginga Tiger. A 1,800-ton parcel was expected to be shipped from Onsan to Zhangjiagang and Jingjiang, China, in late September and a 2,800-ton cargo was likely to be lifted in Onsan for Huizhou, China, in mid to late September. A 1,300-ton lot was discussed for shipment from Onsan to Tianjin, China, in late October. Some larger lots were expected to be shipped to the Americas, with about 15,000-tons on the table for shipment from Onsan to the U.S. in September and a second cargo of 5,000 tons likely to cover the same route in October. A 5,000-ton parcel was also mentioned for shipment from Onsan to Rio de Janeiro in October.

S-Oil has scheduled a one-month turnaround at its Onsan, South Korea, plant, starting in September, which might affect spot availability of Group I, Group II and Group III base oils, but the producer was expected to build inventories ahead of the outage to meet most contractual obligations.

Prices

Volatile crude oil prices since early August made base oil buyers nervous, prompting them to delay additional purchases until more signs emerged indicating whether base oil prices would be adjusted. Prices had plunged to multi-month lows at the beginning of August, but they rebounded on concerns about a potential widespread conflict in the Middle East, which could lead to crude supply disruptions.

At the latest OPEC meeting, the organization decided to maintain production quotas until October. But the possibility of an output increase is already beginning to be priced into the markets, having a bearish effect on oil prices. In terms of economic outlook, the upward revision of U.S. GDP to 3% shows a positive trend, but concerns persist with Chinese Manufacturing and Non-Manufacturing PMIs hovering near 2024 lows. The start of September led the market’s attention to focus on a possible U.S. Federal Reserve rate cut, weighing on oil prices. No trading took place in the U.S. on Monday, September 2, due to Labor Day.

On September 2, Brent November 2024 crude futures were trading at $76.46 per barrel on the London-based ICE Futures Europe exchange, from $79.55/bbl for October futures on August 26.

Dubai front month crude oil (Platts) financial futures for October 2024 settled at $75.07 per barrel on the CME on Aug. 30, compared to $77.75/bbl for September futures on August 23.

Base oil spot prices in Asia were mixed, with some values seeing downward adjustments on lengthening supplies and subdued buying interest, a few remaining steady, and others moving up on tighter conditions. 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 mixed as some cuts have tightened, and others were plentiful. The Group I solvent neutral 150 grade was assessed unchanged at $870-910/t, but the SN500 edged up by $10/t to $1,050-1,090/t. Bright stock was hovering at $1,250-1,290/t, all ex-tank Singapore.

Prices for Group II 150 neutral edged down by $10/t to $930-970/t, but the 500N was steady at $1,050-1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $710-750/t, and the SN500 was up by $10/t at the high end of the range at $910-940/t. Bright stock prices were firm at $1,050-1,090/t, FOB Asia.

Group II 150N was holding at $750-790/t FOB Asia, and 500N was also steady at $910-950/t FOB Asia.

In the Group III segment, 4 cSt, 6 cSt and 8 cSt prices were adjusted down as they succumbed to downward pressure on more plentiful supplies. The 4 cSt grade was down by $10/t at $1,120-1,160/t, and the 6 cSt was also assessed down by $10/t at $1,130-1,170/t. The 8 cSt cut was down by $10/t as well at $1,010-1,050/t.

Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com.

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.