Asia Base Oil Price Report


The Asian base oils market is seeing a burst of activity before the slower summer months, and some producers are rushing to adjust prices before it fizzles.

Starting at the end of the first quarter, the heavy viscosity grades within both the API Group I and Group II segments, have enjoyed strong buying interest from buyers, not only in Asia, but in Europe and the United States as well.

This has led to consecutive upward adjustments of spot and list prices by several producers over the last few months, and the situation has not changed significantly in recent weeks.

The rounds of revisions appear to continue, as it was heard that a major Southeast Asian refiner will be increasing prices in June.

According to sources, the producer will be raising list prices for its Group I and II heavy-vis cuts (including bright stock) by U.S. $20 per metric ton, while its Group II 150 neutral will be increased $10/t into a vast majority of accounts, although some customers may see slightly different increase amounts, starting on June 12. The price of the refiner’s Group I SN150 cut will apparently not undergo any revisions. There was no producer confirmation about the adjustments.

This price move follows a previous increase by the same producer, which became effective on May 22, when the refiner lifted its Group I SN600 and bright stock list prices by $20/t, and its Group II 500N by the same amount.

Meanwhile, spot prices of the heavy-vis cuts also continued on an upward trend, with sellers gradually able to achieve moderate increases during the last couple of weeks, supported by tight supply and steady demand, together with recent gains in crude oil prices.

Spot prices for 500N cargoes, for instance, were said to have inched up by about $10/t compared to the previous week, but this increase came on the heels of similar adjustments two weeks ago.

Brent futures have come off in recent trading sessions, but keep hovering above the $60 per barrel mark. A lack of clear direction in crude oil pricing is keeping market players on edge, as buyers are concerned that if crude futures were to suddenly jump, this would translate into higher base oil prices across the board.

Another element that has grabbed consumers’ attention is the fact that the gap between Group I and Group II prices is widening.

Up until the end of last year, prices for the heavy-vis cuts in both categories were at similar levels, allowing Group I users to replace products with base oils from the Group II category, which offer higher performance.

However, better availability of the Group I cuts in the first quarter due to lackluster demand, particularly in China, broadening the gap between the two segments as Group I prices did not move up as fast as Group II cuts.

At the same time, Group II supply has tightened because of a recent plant turnaround at Formosa Petrochemical’s 600,000 metric tons per year plant in Mailiao, Taiwan. The plant has resumed production, but there were reports that it was running at reduced rates due to sluggish demand for the low-viscosity grades.

While the producer is striving to fulfill its contract commitments during the month of June, it was heard that it was unlikely to offer Group II spot cargoes to China during the month.

The price difference between the Group I and II categories in Asia has grown to around $50/t-60/t for the heavy-vis oils, sending consumers to seek Group I cuts once again.

This has prompted a tightening of the Group I oils, particularly as production of Group I base stock has seen a decrease in Asia in recent months given the rationalization of output.

Current and upcoming Group I plant turnarounds – a couple of them scheduled at Japanese plants – are also expected to exacerbate the tightening balance.

As a result of changing supply/demand conditions and the prospects that availability of certain grades will remain limited in Asia in the short term, base oil prices have been assessed stable-to-firm this week, with some cuts experiencing upward adjustments.

On an ex-tank Singapore basis, Group I SN150 prices were unchanged at $660/t-$680/t, but SN500 was revised up by $10/t at $760/t-$780/t, and bright stock was also up by $10/t at $1,100/t-$1,120/t.

On an FOB Asia basis, Group I SN150 was unchanged at $550/t-$580/t, while SN500 edged up by $10/t at $660/t-$680/t FOB. Bright stock prices were up by $10/t at $1,080/t-$1,100/t FOB.

Within the Group II category, prices for 150N were steady at $570/t-$610/t FOB Asia, and prices for 500N were adjusted up by $10/t to $710/t-$740/t FOB Asia.

In the Group III segment, 4 centiStoke and 6 cSt oils were largely unchanged at $920/t-$940/t FOB Asia amid plentiful availability, while the 8 cSt grade was also steady at $730/t-$750/t FOB Asia.

On the shipping front, the recent flurry of inquiries appears to have petered out, with only a handful of fresh quotes emerging. In South Korea, a combined 1,000 metric tons plus 500 tons were still on the table to cover Yeosu to Tanjung Priok, Indonesia, between June 5-10. Another combined 550 ton plus 450 tons of base oil were likely to be shipped from Yeosu to Ho Chi Minh, Vietnam, around June 10-20. A 2,000-ton lot was being worked on for Onsan to Tianjin, China, for June 8-12 lifting. A second 2,000-ton parcel was discussed for Onsan to Zhenjiang, China, for the same dates.

Lastly, a 2,100-ton cargo was expected to be shipped from Mizushima, Japan, to Hong Kong between June 11-15.

Upstream, July ICE Brent Singapore futures were trading at $65.11 per barrel in afternoon trading on June 1, compared to $64.74 per barrel on May 25.

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