As the year closed, market fundamentals appeared stable to soft, depending on the base oil grade and location. In some Asian countries, activity typically comes to a standstill as businesses and factories close for a few days of New Year celebrations, while in others, participants were preparing for the Lunar New Year holidays in late January. In South Korea, 2024 ended with disaster, as the nation’s worst airplane crash occurred over the weekend, when the country was already dealing with political turmoil.
While many participants stayed away from the market during the year-end holidays, others assessed product needs for the first few weeks of 2025. This was particularly the case in countries such as China, where blenders try to meet base oil needs and prepare inventories ahead of the Lunar New Year holidays starting on January 29.
One particular area of concern for many base oil buyers was whether there would be any API Group I shortages, given that the market has been tight for most of the year, there were ongoing plant outages and a key facility is scheduled for a turnaround in early 2025.
The IRPC Group I plant in Thailand was preparing for a one-month turnaround in the first quarter of the new year, and while the producer was likely to build inventories ahead of the shutdown, it may not be able to offer spot shipments, sources said. This might exacerbate an already tight supply and demand scenario in the region, caused by the permanent closure of a number of Group I facilities and ongoing shutdowns.
A Japanese Group I unit has been off-line since the middle of the year because of a fire, but was anticipated to be restarted at the end of December. A second unit in Japan was undergoing an extended maintenance program which began in late September and was expected to be completed this month as well. Eneos has also planned several turnarounds at its plants in Japan next year. A couple of Eneos plants have been shut down permanently in the last three years as the country’s lubricant demand has declined and the government has supported a switch to greener and more sustainable production, with one of the shuttered refineries in Wakayama expected to be transformed to produce renewable fuels, starting in 2026.
In China, the permanent closure of Dalian Petrochemical’s Group I plant and affiliated refinery over the next six months, might also lead to a slight base stock tightening in that country.
As a result, Group I consumers have set their sights on available Group I cargoes and some transactions were reported concluded within the below-reported ranges over the last couple of weeks. Prices were generally steady, although the lighter grades—which were more abundant—appeared to be under pressure. The heavy grades were less readily available and prices were generally firm. There was talk about Group I SN150 becoming available for export from a Chinese supplier at competitive levels as well.
China has increased its Group II and Group III base oil capacity in recent years, making the country less reliant on base oil imports. However, with the exception of the PetroChina Fushun plant–which reportedly brought expanded Group I capacity of 330,000 metric tons per year on stream in Q3 2024–many Group I plants have been shuttered due to market economics and environmental reasons, while China’s demand for Group I grades, particularly bright stock, remains robust.
Bright stock consumption has been quite strong in the entire region due to demand from the industrial, marine, heavy-duty transportation and agricultural segments, supporting stable to firm pricing. This seemed to be the case in India, as prices for some of the other base oils remained under downward pressure due to lackluster demand and plentiful availability, but bright stock managed to hold its own against the eroding price fundamentals affecting the other grades.
India’s lubricants industry has also made concerted efforts to increase base oil capacity, and several refiners have planned large investments in plant expansions or new projects. According to ICIS analysts speaking at the ICIS Pan American Base Oils conference in New Jersey, U.S., earlier this month, several Indian projects have been expedited as the country strives to attain self-sufficiency and rely less heavily on imported base oils.
Indian Oil Corp. expanded its Group II/Group III plant in Haldia and plans to start up a new Group II/Group III plant in Gujarat next year. A third plant is expected to come on stream in Panipat in 2026. Hindustan Petroleum Corporation Limited also plans to expand its existing Group I/Group II plant in Mumbai by 2025 to produce additional Group II base oils, as well as Group III grades.
Even though Indian buyers felt some concern about potential Group I base oil shortages in the first quarter, they seemed to be confident that there would be ample availability of supplies from domestic Group I and Group II refineries and of competitively priced cargoes from the Middle East. Some Group I cargoes ex-Iran sometimes manage to make their way to India as well. There was ample availability of Group II grades, and most Group I cuts can be replaced with Group II grades, but bright stock is an exception as it is not easily substituted.
Group II grades have been under of a certain amount of pressure in India given competitive offers of U.S. cargoes as suppliers tried to finalize export transactions for January and February shipment. Additional U.S. cargoes typically move to India during the fourth quarter and first few months of the year as U.S. Gulf Coast producers release extra volumes held during the hurricane season and as domestic demand slows down in the U.S. However, volumes might be lower than in previous years because of an unexpected shutdown at the Excel Paralubes Group II plant in Louisiana in November/December. The producer was forced to suspend spot offers and was heard to have cancelled some export commitments due to the unplanned production outage.
Group II/Group III spot availability may tighten in Asia in the first quarter as South Korean producer GS Caltex was reported to have scheduled a turnaround at its Group II/Group III plant in Yeosu next March and has started to build inventories to cover term commitments during the outage. Spot supplies from the producer may be limited, though.
Group III demand in India has been tepid as blenders seemed to have adequate inventories and there were expectations of ample availability of regional and Middle Eastern imports over the next few weeks because demand has weakened in other regions such as North America, which typically receives large volumes of imported Group III base oils.
Prices
Looking back at 2024, oil market analysts noted that there had been a price rally until April and then a gradual downtrend, but conceded that the OPEC+ group had been “more successful at keeping the market stable than many would give it credit for, especially given the geopolitical tensions and disappointing China demand,” Reuters reported.
Crude oil futures were steady in Asia in early trading on Monday as modest gains posted in the previous week were maintained, while traders focused on the outlook for the New Year. Price support came from China’s announcement of a $400 billion bond issue as the government in Beijing aims to boost its struggling economy and help the ailing property market. A strong dollar also weighed on commodity prices.
On December 30, Brent February 2025 futures were trading at $73.89 per barrel on the London-based ICE Futures Europe exchange, from $73.21/bbl on December 23.
Dubai front month crude oil (Platts) financial futures for January 2025 settled at $73.72 per barrel on the CME on December 27, compared to $72.55/bbl on December 20.
Spot base oil prices were assessed as largely unchanged from a week ago given muted business, with the lighter grades still exposed to downward pressure because of ample supplies. 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 from a week ago as trading was subdued. The Group I solvent neutral 150 grade was heard at $770-810/t, and the SN500 was assessed at $1,030-1,070/t. Bright stock prices were firm at $1,320-1,360/t, all ex-tank Singapore, on tight regional supply.
Prices for Group II 150 neutral were hovering at $840-880/t and 500N was unchanged at $1,060-1,100/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was holding at $640-680/t, and the SN500 at $910-950/t. Bright stock prices were unchanged at $1,120-1,160/t, FOB Asia on snug supply.
Group II 150N was steady at $690-730/t FOB Asia, with a December/January cargo heard to have been concluded close to the high end of the range. The 500N was adjusted up by $10/t at the high end of the range to $920-970/t FOB Asia as a 2,000-3,000-ton cargo was heard finalized at levels near $970/t FOB Asia.
In the Group III segment, 4 cSt was unchanged at $1,030-1,070/t and 6 cSt was assessed at $1,060-1,100/t. The 8 cSt cut was also holding at $950-990/t amid limited trade.
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.