Group II grades were more plentiful, and while light cuts showed ample availability – placing downward pressure on pricing – heavier cuts were less available. However, the approach of the colder months in some countries meant that demand for the heavier grades might see a slowdown.

Some offers for South Korean Group II material have edged up, but buyers seemed reluctant to accept the higher levels because of falling crude oil prices and expectations of increased supplies in the coming weeks. There was also the assumption that Group II offers from sources such as the United States may emerge at attractive prices during the fourth quarter, particularly to destinations such as India, as U.S. suppliers were anticipated to release barrels that were stored as back-up material during the hurricane season, which officially does not end until November 30, although volumes may be smaller than anticipated this year.

Within the Group III segment, the 4 cSt and 6 cSt grades succumbed to downward pressure because of abundant supplies and sluggish demand. The 8 cSt was in a better position price-wise because of a more balanced supply-and-demand ratio. Group III base oils were expected to remain under pressure unless the conflict in the Middle East leads to output and transportation disruptions, as demand in other regions such as Europe and the U.S. has started to slow down and additional volumes were likely to be offered into Asia.

There were also a number of planned and unplanned outages affecting base stock availability. A couple of Group I base oil units in Japan remained off-line, with an unplanned extended shutdown Idemitsu’s Group I plant following a fire last July possibly lasting until year-end, and a two-month turnaround at a Cosmo Oil unit that started in late September likely leading to a tightening of Group I supplies. There was no update available from the producers as to the status of the plants. A third Group I unit in Japan was also expected to start an extended turnaround in the first quarter of 2025.

In Indonesia, Pertamina planned to start a one-month turnaround at its Cilacap Group I unit in mid October.

Operations at PetroChina’s Dalian Petrochemical Group I plant were to cease before the end of the year, leading to a small tightening of supplies in China. A Chinese Group III plant was also expected to start a maintenance program this month.

In South Korea, S-Oil was understood to have started a turnaround at its Group I and Group II units in Onsan in mid September and was anticipated to complete maintenance at the end of October. The producer was expected to be able to meet contractual obligations during the outage, but spot supply of Group I and Group II grades may be more limited. Group III cuts were not expected to be affected.

A second South Korean producer was planning to conduct at turnaround in the first quarter of 2025, but further details were unavailable.

The plant shutdowns were expected to have only a slight impact on availability because they would be offset by sluggish downstream demand. Soft lubricant consumption in many countries, deepened by economic and geopolitical uncertainties and changing market dynamics including stricter emission policies and electrification, have resulted in less vibrant demand for base oils over the last several months.

In the key consumer market China, buyers remained on the sidelines as economic uncertainties prevailed, although there was some hope that recently announced government policies would spur economic opportunities and more consumer confidence.

Most buyers were looking to secure domestic base oils as imports were considered too pricey and some grades, such as the Group I cuts, were not widely available. There was more availability of the Group II grades, and domestic suppliers have adjusted prices down to attract buyers. But there were also plenty of import offers to chose from, and importers and distributors also lowered prices to compete with local material. Likewise, Group III base oils were ample, even though a domestic Group III plant was expected to start a turnaround this month, and suppliers have reduced prices to compete with imports.

Most Chinese plants were heard to be running well and some oversupply has been building—allowing suppliers to offer export cargoes, notably to Singapore—which had not been the case in previous years as China had been a net importer of base oils, with the heavy-viscosity grades particularly being sought after.

Even though Taiwanese Group II producer Formosa Petrochemical has had to reduce base oil shipments to China due to reimposed tariffs, it regularly continues to ship term cargoes to China, as well as to other destinations such as India. This week, it was heard that a 3,000-metric ton parcel was on the table for shipment from Mailiao to Chennai, India, in late November, and a second cargo ex-Taiwan was also being worked on.

India seemed to be a brighter spot in terms of finished lubricant demand, particularly from the automotive and motorcycle segments, as there has seen an uptick following the monsoon season and ahead of Diwali-related celebrations at the end of October and other religious holidays in November. As a result, there has been improved base oil buying interest.

Despite import prices being fairly steady, domestic prices were still deemed more attractive and local products carry fewer uncertainties in terms of logistics and lead times. Most import prices were steady week on week, but the heavier cuts in the Group I and Group II segments saw moderate increases of $5 per metric ton to $15/ton for CFR India transactions. Bright stock prices were stable despite healthy demand for this grade.

Importers continued to face competition with prices of local supplies, as domestic refiners have the benefit of being able to refine discounted Russian crude oil. Most Indian plants were running well following the monsoon season, with the exception of Indian Oil Company’s Group I and II plant in Haldia, which was heard to have extended its scheduled maintenance for a couple of weeks until late October, and CPCL, which embarked on a brief shutdown on its Group I unit in Chennai this month.

There were also expectations that additional Group II cargoes would become available at attractive levels during the fourth quarter as U.S. producers set their eyes on markets in Asia to place surplus supplies, although there were indications that the volumes may be lower than previously thought because of unexpected production issues as one plant and ongoing tightness of the Group II 100 neutral grade in the domestic U.S. market. Furthermore, the current strength in U.S. pricing versus CFR India numbers would make the arbitrage difficult to work in the short term.

Given an upcoming turnaround at a South Korean base oils plant in the first quarter of 2025, there could also be more limited supplies from that country offered to India as the producer builds inventories to cover contractual requirements during the outage.

At the moment, however, several cargoes were being discussed for shipment to India from a variety of origins, with a prompt 4,000-5,000-ton parcel expected to be shipped from Yanbu in Saudi Arabia to Hamriyah in the United Arab Emirates and on to Mumbai. A second 5,000-ton lot was expected to be lifted in South Korea to West Coast India in late October. About 12,000 tons were looking to be shipped from Daesan, South Korea, to Mumbai between October 11 and November 30. A 3,000-ton cargo was mentioned for possible shipment from Rayong, Thailand, to WCI in early November. Between 14,000 tons and 18,000 tons were likely to be shipped from Yanbu, Saudi Arabia, to Mumbai in late October. A 10,000-ton lot was on the table for shipment from Kaohsiung, Taiwan, to Kandla between November 10 and November 25.

Prices

Spot base oil prices were mixed, with some values slipping because of lengthening supply, slowing demand and falling feedstock prices, while others remained steady or moved up on more limited availability. 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 stable to softer. Group I solvent neutral 150 grade slipped by $20/t to $830-870/t, but SN500 was unchanged from the previous week at $1,050-1,090/t. Bright stock prices were adjusted up by $10/t to $1,290-1,330/t, all ex-tank Singapore, due to tight availability and to reflect recent transaction levels.

Prices for Group II 150 neutral fell by $20/t to $870-910/t on lengthening supplies but 500N was steady at $1,050-1,090/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was holding at $660-700/t and SN500 was also unchanged at $900-940/t. Bright stock prices were still hovering at $1,080-1,130/t, FOB Asia range.

Group II 150N was assessed at $720-760/t FOB Asia and 500N was holding at $920-960/t FOB Asia.

In the Group III segment, 4 cSt, 6 cSt and 8 cSt prices remained exposed to downward pressure due to mounting supplies. The 4 cSt grade was lower by $10/t at $1,060-1,100/t and the 6 cSt was also assessed down by $10/t at $1,070-1,110/t. The 8 cSt cut was an exception and remained steady at $970-1,010/t.

Crude

Crude oil futures remained volatile and were swayed by the ongoing conflict between Israel and Hamas and the economic situation in China. A slowing Chinese economy has impacted oil consumption, with crude refining showing a sixth consecutive monthly drop in September. While many refineries close for maintenance ahead of the extended National Day holidays in October, it was still a sign that Chinese demand for refined products had fallen.

Last week, Israel killed the new Hamas chief, Yahya Sinwar, who had replaced the previous Hamas chief, also assassinated by Israel in July. U.S. president Joe Biden believed that this could lead to a hostage deal and ceasefire, but experts seem to differ, expecting a prolonged conflict, as Hezbollah has vowed to escalate its attacks on Israel in retaliation for Sinwar’s death.

Crude oil futures were on a downward trend last week on concerns about global demand, and the trend extended into Monday, with values poised to show the biggest decline in six weeks.

On October 21, Brent December 2024 futures were trading at $73.36 per barrel on the London-based ICE Futures Europe exchange, from $78.13/bbl on October 14.

Dubai front month crude oil (Platts) financial futures for November 2024 settled at $71.60 per barrel on the CME on October 18, from $77.55/bbl on October 11.

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.