Asia Base Oil Price Report


Spot base oil prices in Asia were stable to slightly firmer on tightening supply and steeper feedstock values, but buyers and sellers are concerned that the uptrend may not be sustained.

With margins having narrowed significantly since early last year due to the steady decline in base oil pricing, suppliers have been eager to take advantage of the first chance to move numbers up.

The rebound in crude oil prices in early March seemed to offer such an opportunity, while a tightening base stock supply scenario lent further support to climbing price ideas.

However, crude oil futures have fluctuated over the last couple of weeks, undermining consumers’ confidence that the rebound would be maintained.

There is also a degree of concern surrounding economic growth in key markets such as China, where state-owned energy companies registered significant losses last year.

Bloomberg reported this week that PetroChina expected its 2015 profit to plummet as much as 60 percent to 70 percent from a year earlier because of the fall in crude oil prices and lower domestic natural gas values.

Sinopec posted a 30 percent profit decline in 2015 – slightly lower than anticipated, as refining offset the impact from the fall in oil prices.

China National Offshore Oil Corporation’s net profits slumped 66.4 percent year on year due to lower oil prices, but CNOOC surpassed Sinopec as China’s second biggest oil producer in 2015.

With the arrival of spring, Asian demand for the heavier base oil grades tends to increase as blenders change formulations for warmer weather, and it appears that bright stock and API Group I solvent neutral 500 and Group II 500 neutral are drawing additional requirements.

Given ongoing and upcoming turnarounds at a number of Asian base oil facilities, together with local holidays – which can affect manufacturing operations and transportation – the product tightness is expected to be exacerbated in coming weeks if demand continues at current levels.

Availability of Group I cargoes from Southeast Asia is expected to be affected by the New Year Water Festival celebrated in Thailand in mid-April. Domestic demand in that country was heard to have increased ahead of the holiday, leaving fewer parcels available for export.

Sources said that supply from Indonesia has been somewhat limited as well. This may be due to the fact that squeezed margins and lackluster market conditions in previous months had prompted producers throughout the region to keep lean inventories, therefore curbing the amount of spot availability.

As far as production is concerned, Taiwanese producer Formosa Petrochemical plans to shut its 600,000 metric ton per year Group II plant in Mailiao, Taiwan, for a two-month turnaround starting in June. In China, it was heard that Shandong Hrnd Group would take its base oils unit in Shandong province off-line in April. The plant has capacity to produce 200,000 t/y of Group II base oils, according to data from Lubes’n’Greases Global Guide to Base Oil Refining.

The possibility of snug supply and firmer prices have driven a number of buyers to seek additional spot volumes of the heavy oils, but transactions have been thwarted by limited availability.

Asian base oil spot prices timidly edged up this week by U.S. $5-$10 per metric ton for some of the most sought-after grades, such as the high-viscosity cuts.

On an ex-tank Singapore basis, the Group I SN150 was assessed unchanged at $510/t-$530/t ex-tank Singapore, but the SN500 was up by $10/t at $580/t-$600/t, and bright stock was also up by $10/t at $1,000/t-$1,020/t.

The Group II 150N cut edged up by $5/t to $495/t-$515/t ex-tank Singapore, while the 500N was up by $10/t at $600/t-$620/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was unchanged at $400/t-$430/t; the SN500 moved up by $10/t to $430/t-$450/t FOB; and bright stock was also firmer by $10/t at $880/t-$900/t FOB.

In the Group II category, the 150N cut was up by $5/t at $405/t-$435/t FOB Asia, while the 500N inched up $10/t to $525/t-$545/t FOB Asia.

In the Group III tier, the 4 centiStoke and 6 cSt oils were steady at $850/t-$880/t FOB Asia, and the 8 cSt grade was also unchanged at $600/t-$620/t FOB Asia.

In related production news, there has been growing interest from Asian participants about upcoming production start-ups and expansions in the Middle East.

One of these projects is the expansion of Luberef’s base oil plant in Yanbual Bahr, Saudi Arabia, which is slated to add 700,000 t/y of Group II base oil and increased bright stock production. The expansion is in its final stages and close to being completed, with production expected to commence in the third quarter, according to market sources.

There has also been talk about the new Abu Dhabi National Oil Company (Adnoc) plant in Ruwais, United Arab Emirates. The plant will have the capacity to produce 120,000 t/y of Group II base oils and 500,000 t/y of Group III oils. It was heard that the company was performing test runs and commencing the start-up process within the next month, but producer confirmation could not be obtained.

Upstream, crude oil futures rebounded from earlier losses because the dollar continued to weaken as March came to an end, but analysts’ lingering concerns about growing crude stocks capped gains.

ICE Brent Singapore May futures ended the afternoon trading session at $38.50 per barrel on April 4, compared to $40.64 per bbl on March 28.

Gabriela Wheeler can be reached directly at

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.

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