As has been the case for most of the year, Group I base stock prices were either steady or slightly up, depending on grade and regional availability. With most Group I plants now located in Southeast Asia and Japan, exports out of this region largely determined price direction. Spot exports have generally been limited because producers prioritize domestic requirements and term shipments, but a few cargoes have surfaced over the last couple of weeks. However, buyers have been timid in vying for these offers as prices were considered too high, and expectations of a demand slowdown in the last quarter also fueled hopes of lower pricing, particularly as some of these grades competed with Group II cuts, which were more plentiful.

There was also a rise in Chinese offers of Group I and Group II cargoes for export, but it could not be determined at the time of writing whether most of these volumes would be moving to Singapore or India, or whether consumers in other countries would bid for these parcels. A state-run Chinese producer that operates a lubricants plant in Singapore regularly exports cargoes to its subsidiary, but there were apparently additional export cargoes on offer. At the same time, current Group I bright stock values for imports to China were unworkable, and buyers have therefore turned to domestic supplies.

The Group II grades were generally more plentiful in Asia, with demand for the heavy-viscosity cuts experiencing reduced demand during the winter season. Prices remained exposed to downward pressure and were not expected to reverse direction any time soon as additional volumes were anticipated to come to the market in the coming weeks. Some offers for South Korean Group II material have edged up on tightening supplies, but buyers seemed reluctant to accept the higher levels.

Additionally, buyers in India expected U.S. suppliers to offer Group II cargoes to reduce domestic inventories built during the hurricane season, which officially does not end until November 30, while some regional producers also strive to finish the year with minimum stocks. However, the volumes offered from the U.S. were likely to be less abundant than in previous years as the domestic market has tightened on unexpected production issues and as producers have favored Group III output.

Global Group III supplies have grown, and this was exerting pressure on current values in Asia, with the 4 cSt and 6 cSt grades showing downward revisions given abundant supplies and lackluster demand. Availability of the 8 cSt grade was more limited and prices were steadier. Group III base oils were expected to remain under pressure unless the conflict in the Middle East leads to output and transportation disruptions and exports from that region decline. Demand in Europe and the U.S. has weakened and additional volumes of Asian material were also expected to hit the market.

While some base oil grades have started to lengthen given slowing demand, a number of planned and unplanned plant shutdowns might impact base stock availability, although most of them were anticipated to wrap up in the next few weeks and a majority of producers were expected to have built inventories to cover contractual commitments during the outages.

A couple of Group I base oil units in Japan were still off-line, with an unplanned extended shutdown at 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 leading to a tightening of Group I supplies. A third Group I unit in Japan was also anticipated to embark on an extended turnaround in the first quarter of 2025. There was no update available from the producers as to the status of the plants.

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

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 by the end this month. Group III cuts were not expected to be affected.

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

In India, the Group I/Group II plant of Indian Oil Corporation Limited (IOCL) in Haldia has been undergoing a scheduled turnaround since August, and CPCL embarked on a brief shutdown on its Group I unit in Chennai this month.

Operations at PetroChina’s Dalian Petrochemical Group I plant were expected to cease before the end of the year, leading to a slight tightening of supplies in China. A Chinese Group III plant was also expected to start a shutdown this month, limiting extra supplies, while a second producer has reduced operating rates due to weak market economics.

Chinese buyers have shown moderate buying interest in fresh base oil cargoes, with economic uncertainties and lower lubricant consumption impacting base oil demand. Availability of Group I bright stock imports was limited in China as current import prices were not competitive and importers have raised offers of existing stocks. While offers of Southeast Asian material may emerge in the coming weeks, buyers in other countries may be able to secure these cargoes more readily as they have the advantage of proximity and being able to bid at higher prices.

Stocks of Group II imports were plentiful in China and these competed with domestic supplies, leading to lower offers for imported materials. Buyers did not seem concerned about being able to secure sufficient volumes to run day-to-day operations as both imports and domestic supplies were plentiful. A local producer was heard to have cut its operating rates and has been able to lower its inventory levels.

Group III supplies were also deemed more than adequate in China, and prices remained under pressure. As mentioned above, a turnaround at one Group III facility and reduced rates at another were expected to bring more balance to the Group III segment, although imports were still ample.

In India, Diwali might cause a temporary slowdown in activity but base oil and lubricant buying should pick up after the holidays. People typically splurge on gifts and household goods during Diwali. By one estimate, Diwali-driven consumer spending in Indian cities could touch 1.85 trillion rupees (U.S.$22 billion) in the nearly two months leading up to the Hindu festival. Whether this means increased lubricant and finished products demand remains to be seen, but participants were optimistic about stronger conditions following the subdued monsoon season since June.

Demand for Group I base oils was generally steady, but domestic availability of the light grades appeared to have become more plentiful in India, and this has led to downward price adjustments for imports, with CFR India indications heard to have slipped by $10 per metric ton from the previous week. In contrast, the heavier cuts showed tighter conditions, supporting a small increase in pricing, with CFR India prices edging up by $10/t from a week ago. Bright stock import prices were reported as steady, although there could be some price movements if offers for material originating in the U.S. were accepted. U.S. producers often export Group II cargoes to India and Group I parcels are more of an exception.

Group II grades were fairly abundant, but domestic and regional plant shutdowns have limited the surplus and prices were maintained. As mentioned above, IOCL’s Group I/II plant in Haldia has been undergoing a turnaround but was anticipated to be restarted at the end of October, leading to more plentiful supplies in the coming weeks, once the company is able to attain full rates and build inventories.

Spot offers of Group II cargoes for November shipment from South Korea and Taiwan were muted, following a flurry of discussions in the previous weeks, possibly because these suppliers have met their goals in terms of export shipments. Reports suggested that India had substantially increased Taiwanese base oil imports since August.

Meanwhile, there have been many Group III cargoes expected to arrive in India from the Middle East, particularly as European and U.S. demand has declined, and suppliers have been looking for alternative homes for their products. The 4 cSt grade was considered the most plentiful and CFR India prices were therefore heard to have slipped by $10/t from the previous week. Suppliers were doing their utmost to attract buying interest and have therefore adjusted offers down, but demand was still difficult to capture.

A number of cargoes were being discussed for shipment to India from a variety of origins, with a 3,000-metric-ton parcel mentioned for possible lifting in Rayong, Thailand, to West Coast India in early November. About 4,000 tons were also quoted for shipment from Shanghai to Mumbai at the end of October. A 3,000-ton lot was expected to be shipped from Mailiao, Taiwan, to Chennai at the end of November.  A second 3,000-ton parcel was mentioned for possible shipment from Sriracha, Thailand, to Port Klang, Malaysia, and Mumbai in early November.

Crude

Crude oil futures were trading lower last week, but strengthened over the weekend on reports that Israel had launched strikes on Iran in response to Iranian missile attacks in early October. However, on Monday, futures slipped after it was revealed that the Israeli attacks had not hit Iranian oil and refining facilities as had been feared. In Asia, some attention was focused on Japan’s parliamentary election, with the Japanese yen hitting a three-month low on Monday as Japan’s ruling party lost its parliamentary majority for the first time in decades.

On October 28, Brent December 2024 futures were trading at $72.61 per barrel on the London-based ICE Futures Europe exchange, from $73.36/bbl on October 21.

Dubai front month crude oil (Platts) financial futures for November 2024 settled at $74.27 per barrel on the CME on October 25, from $71.60/bbl on October 18.

Prices

Spot base oil prices were mixed, with some values falling because of lengthening supply and slowing demand, and others either remaining steady or inching 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 mixed. Group I solvent neutral 150 grade slipped by $10/t to $820-860/t, and SN500 was also lower by $10/t at $1,040-1,080/t. Bright stock prices were steady at $1,290-1,330/t, all ex-tank Singapore, due to tighter availability.

Prices for Group II 150 neutral fell by $10/t to $860-900/t on lengthening supplies but 500N edged up by $10/t to $1,060-1,100/t, ex-tank Singapore.

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

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 and 6 cSt prices remained exposed to downward pressure due to mounting supplies. The 4 cSt grade was lower by $10/t at $1,050-1,090/t, and the 6 cSt was also assessed down by $10/t at $1,060-1,100/t. The 8 cSt cut was an exception and remained unchanged at $970-1,010/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.