Asia Base Oil Price Report


Asian base oil trading has ground nearly to a halt as offices and factories closed their doors for the week-long Lunar New Year holidays. But the end of the celebrations will also mark the start of the typically busy spring season, when blenders and lubricant marketers gear up for increased operating rates and heightened demand.

While it was difficult to predict what direction base oil prices would take after the holidays, suppliers felt that requirements would increase, which might create moderate upward pressure on prices. Margins have been fairly thin and feedstock values firm, so producers have been anxious to increase base stock prices. Conditions have not cooperated, though. After months of downward pressure caused by ample availability against weak demand, suppliers hoped that prices would stabilize or even move up on improved demand and tightening supply.

Buyers usually prefer to end the year with low inventories, and this depressed buying appetite during the last quarter of 2013. Heading into the holiday, though, suppliers expected buyer inventories to have been depleted and to drive customers back to the market after the break.

While producers hope for base stock price recovery in the first quarter, most participants are aware of signs of slowing growth in emerging markets and a weaker-than-expected manufacturing performance in China. Such developments could have a negative impact on the base oil market.

Moreover, additional base oil capacity is scheduled to come online in Asia and elsewhere later this year. The Hyundai Oilbank-Shell joint venture is expected to start up its new API Group III plant in Daesan, South Korea, in the second half of the year. The new SK Lubricants-Repsol Group II/III plant in Cartagena, Spain, is slated to come online in September.

Chevron is getting ready to start commercial production at its Group II plant in Pascagoula, Mississippi, United States, at the end of the first quarter. While cargoes from the Chevron plant are not expected to head to Asia, there is concern that the added product will result in a reshuffling of regional supply sources, and that this will impact the markets balance in Asia. For example, other U.S. Group II producers might be forced to ship product to India at competitive prices, and this would reduce opportunities for Asian suppliers to sell into India.

One Southeast Asian producer expressed optimism about the markets outlook for the next couple months. The supplier admitted that requirements for Group III cuts were slow in December and most of January, but insisted that demand picked up before the holidays – so much so that the producers supply was sold out until March. The producer also said that offers had moved up to a minimum of U.S. $1,050/ton FOB Southeast Asia for spot transactions involving Group III material.

Prices for Group III base oils have been revised upward to reflect the latest reported business. Four and 6 centiStoke oils were mentioned at $1,020-$1,060/t FOB Asia, while the 8 cSt grade was heard at $1,010-$1,050/t FOB Asia, reflecting a $10/t upward adjustment at both ends of the spread.

In the other base stock segments, demand was expected to improve after the holidays, except that India remained a question mark. While a Northeast Asian seller reported growing appetite for Group I cargoes from Indian buyers, a looming February vote on a national budget was creating economic uncertainties that delayed purchasing decisions.

In general terms, Group I and II base oil prices in Asia were assessed as largely unchanged this week amid subdued activity, with Group I solvent neutral 150 heard at $920-$970/t, SN500 at $1,020-$1,050/t, and bright stock at $1,110-$1,160/t, all FOB Asia. Prices for Group II material were also assessed steady at $980-$1,040/t FOB Asia for 150 neutral, and at $1,050-$1,110/t FOB Asia for 500N.

Just as base oil activity has slowed, inquiries on the shipping front also petered out. Few cargoes were being discussed, with a 1,500-ton parcel still on the table to cover Onsan, South Korea, to Tianjin, China, during Feb. 21-24, and another 1,500-ton lot expected to ship from Ulsan or Yosu, South Korea, to Merak, Indonesia, during Feb. 18-28. A 5,000-ton cargo of lubes was being worked on from the Amsterdam-Rotterdam-Antwerp area of Western Europe to East Coast India for shipment at the end of January or the first half of February.

Upstream, March ICE Brent Singapore futures were trading at $106.06 per barrel during the Asian trading day on Feb. 3, compared with $107.64/bbl on Jan. 27.

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

Related Topics

Base Oil Pricing Report    Base Stocks    Other