Asia Base Oil Price Report


There was further evidence of a slowdown in the Asia base oils segment this week, as demand typically becomes more sluggish in the June-August timeframe, and spot prices teeter on the edge of a sliding slope because of reduced buying interest.

This condition appears to be particularly evident for the heavy-viscosity grades, including API Group I solvent neutral 500 and Group II 500 neutral and 600N. All these grades are in plentiful supply and are therefore more exposed to downward pressure. Bright stock, on the other hand, continues to see healthy demand and stable-to-firm pricing.

Producers have been feeling pressure from high crude oil and feedstock costs, boosted in recent weeks by uprisings in Syria and Iraq that threatened the stability of oil supply. However, implementing any type of upward adjustment would be difficult, base stock suppliers conceded, given that availability of most grades is more than adequate, and there are not many turnarounds planned in the next few months.

In fact, some plants that were undergoing maintenance, such as Hindustan Petroleum Corp. Ltd.s plant in India, or that had been unexpectedly shut down, as in the case of Integrated Refinery Petrochemical Complexs unit in Thailand, are back on stream. As a result, regional availability has improved.

HPCL was heard to have restarted its 475,000 tons per year Group I and II plant in Mumbai the last week of June, following a routine maintenance in May and June. IRPC resumed production at its base oils unit in Rayong after a fire damaged part of the refinerys vacuum gas oil hydrotreater on June 9, according to sources.

Furthermore, reports indicate that product from the new Hyundai Oilbank-Shell Group II plant in Daesan, South Korea, will enter the market in late July or August, swelling supply even more. The plant has an initial design capacity of 650,000 t/y, according to the companys website. Some sources predicted that only lighter grades produced at the facility would be available first, averting oversupply of the higher-vis cuts, which are already showing some length.

Participants also expected a large portion of the production to be allotted to Shells downstream lubricants blending operations, thereby creating less of an impact on the regional supply-demand balance. Shell Group has a network of 19 lubricant blending plants across Asia, according to the companys website. Others contended, though, that if Shell does take output from the new plant that it will probably utilize less base stock from other suppliers, meaning that the net impact will still be a further loosening of supply.

Industry players also expected to see increased volumes of base oils offered into the spot market in the next few weeks, as demand from the various finished lubricants segments tends to decline in the June-August timeframe, only to pick up again in September. Term customers trim their requirements and maintain lean inventories during this period, sources explained.

A northeast Asia Group II supplier will be reducing the volumes shipped to its term customers in China in July because of lower requirement levels, sources added. Traders in China have cut back on securing imports because prices are high compared to buyer expectations, and there is ample domestic availability to meet current demand.

Domestic prices in China have seen some softening over the last several weeks due to increased supply and shrunken demand. Suppliers have tried to encourage purchases by lowering prices, but buying interest has been lukewarm nonetheless.

Likewise, the Indian market has been lackluster given the start of the summer monsoon season, which typically lasts from June until September. While manufacturing itself is generally not affected by the heavy rains, transportation and deliveries are often disrupted, sources said.

Despite the slowdown in demand, base oil prices increased in India during the week because of reduced availability from the Middle East as planned turnarounds, together with political and social unrest in the region, constrained base oil supply.

Prices of Group I imports moved up by U.S.$30-40/ton in the last couple of weeks, with SN500 mentioned at around $1,040-1,060/ton CFR India. Domestic prices also underwent upward revisions, with Group I values rising between Rs 0.40/liter to 2.00/liter, depending on the cut, as of July 1, sources commented.

In terms of pricing, there were a few changes noted in the Asian market this week, with SN150 edging up by $10/ton at the high end of the prevailing FOB range on higher bids and offers, and Group III 8 centiStoke grade dropping by the same amount.

On an ex-tank Singapore basis, Group I SN150 was hovering at $1,080-$1,120/t. SN500 oils were assessed at $1,080-$1,130/t, and bright stock was steady at $1,210-$1,270/t. On an FOB Asia basis, Group I SN150 was mentioned at $990-$1010/t FOB, reflecting a $10/ton hike at the top end of the spread. SN500 was holding at $1,010-$1,030/t FOB. Bright stock prices were discussed at $1,160-$1,190/t FOB.

Group II 150N was heard at $1,020-$1,050/t FOB Asia, while 500N was steady at $1,030-$1,060/t FOB Asia, although it remained exposed to downward pressure, and business was taking place near the low end of the range.

In the Group III segment, 4 centiStoke and 6 cSt oils were steady at $1,030-$1,080/t FOB Asia, and the 8 cSt grade was slightly lower by $10/ton at the top end at $1,020-$1,040/t FOB Asia.

In terms of shipping, several cargoes were expected to be moved from Japan to various destinations in Asia. A 3,500-ton lot was being discussed from Kainan to Hong Kong and Bangkok, Thailand, for July 10-18 shipment. A 2,000- to 4,000-ton parcel was on the table for Kainan to Singapore and/or Bangkok during July 15-20. A 1,000-ton cargo was being worked on for Negishi to Merak, Indonesia, for second-half July lifting. A 3,000-ton parcel was likely to be shipped from Yokkaichi to Hong Kong and Zhuhai, China, on July 21-25. A 2,000-ton lot of SN500 was in discussions for Wakayama to Singapore for second-half July shipment. A second 2,000-ton cargo emerged for Wakayama to Mumbai, India, for the same dates.

In South Korea, a 1,000-ton parcel was being worked on from Onsan to Tianjin, China, for July 24-27 shipment and delivery between July 28-31. A combined cargo of 2,000 tons was expected to be shipped from Onsan to Taicang, China, on July 13-15. A 500-ton 600N parcel was in discussions for Yeosu to Taichung, Taiwan, for July 20-31 lifting.

Elsewhere, a 1,750-ton cargo was on the table for Sriracha, Thailand, to Singapore for second-half July shipment, while a 1,500-ton lot was expected to be shipped from Sriracha to Manila during the same timeframe.

Finally, a 2,000-ton parcel was likely to be shipped from Theodosia, Ukraine, to Singapore on a prompt basis.

Upstream, August ICE Brent Singapore futures were trading at $110.47 per barrel in afternoon trading July 7, compared with numbers at $112.62/bbl on June 30.

Gabriela Wheeler, based in Japan, can be reached directly at

Related Topics

Base Oil Reports    Base Stocks    Other