Asia Base Oil Price Report


Base oil prices in Asia have been on an upward trend recently, and it persisted last week, underpinned by rising crude oil values and a tightening supply and demand ratio.

Crude has climbed more than 15 percent since hitting its February lows, but there are traces of downward pressure because of concerns about ongoing global oversupply against weakening demand.

Most participants were anxiously awaiting the results of the Doha, Qatar, meeting on April 17, amid speculation that members and non-members of the Organization of the Petroleum Exporting Countries (OPEC) would agree to an oil output freeze.

However, after early optimism, discussions in Doha yielded no agreement on a production freeze, and Iran said it would increase its output despite threats by Saudi Arabia.

Another factor that impacted futures during the week was the unexpected buildup in U.S. crude inventories due to a decline in refinery demand.

Still, Brent futures were trading at significantly higher levels than at the beginning of the month. ICE Brent Singapore futures closed at $43.59 per barrel in afternoon sessions on April 14, up from $41.83 per bbl. on April 11, and more than $5 per bbl. above the April 4 settlement of $38.50 per bbl.

Aside from higher crude costs, a tightening base oil supply and demand scenario in the region was also contributing to the upward movement of spot prices.

Spot availability of the heavy-viscosity oils was said to be limited, as not many suppliers were able to offer sizeable cargoes for May shipment.

This has led to a gradual increase in offer levels, with some of the Group I and Group II heavy-vis cuts being discussed at $10-$20 per metric ton markups from the previous week.

The heightened demand was said to be driven by buyers’ need to replenish inventories. Many consumers had stayed away from the market – or had purchased small quantities – while prices were on a downward spiral, as they wanted to avoid the risk of paying a high price one week, only to find that values had softened the following.

A generally more positive outlook was also feeding some of the demand revival, while concerns over possible supply shortages also drove a number of buyers into the market.

However, availability seems to be adequate for most grades, with the exception of offers for the heavy-vis cuts, which are said to be sparse, driving prices up.

In India, there has been some concern about the tightening of Group I supplies, but it was heard that there were several offers on the table for Middle East product, particularly from Iran, which could help fill the gap left by regional suppliers.

Group I price indications were heard at around $460-$480/t CFR India for solvent neutral 150, but SN500 moved up $15/t to $465-$485/t CFR and bright stock was also up at $940-$960/t CFR.

The Group II oils were hovering at around $510-$530/t CFR India for the 150N and $610-$640/t CFR for the 500N.

In China, buyers have also returned to the market to secure product before spot availability narrows further, resulting in higher selling ideas.

Reduced spot availability for Group II oils from Taiwanese producer Formosa Petrochemical in coming weeks, together with a couple of domestic plant shutdowns, have allowed Chinese importers to move prices up by $5-$10/t week-on-week.

Chinese producer Shandong Hrnd Group was heard to have shut down its 200,000 ton per year Group II base oils unit in Shandong province for a 40-day turnaround earlier this month, while Hainan Handi Sunshine Petrochemical was also expected to idle its 300,000 t/y Group II base oils facility in Hainan province for a routine turnaround this week.

In Japan, a projection by the International Monetary Fund that the country would slip into negative economic growth in 2017 could affect the government’s decision on whether to raise the consumption tax from 8 to 10 percent in April 2017 as scheduled, Japanese newspaper Mainichi reported.

The IMF predicted that Japan’s gross domestic product would contract in 2017, indicating that the planned sales tax increase would be one of the reasons for the contraction. If Japan’s GDP actually contracts, it will be the first negative growth since 2014, when the country’s consumption tax was raised from 5 percent to the current 8 percent.

After that tax increase, the Japanese economy entered a recession, but the automobile industry benefitted from a significant surge in car sales just ahead of the implementation of the higher tax, as consumers were eager to beat the increase.

Automakers are also hoping that the new tax hike scheduled to go into effect in April next year will help boost sales in the December-March time frame.

In terms of pricing, base oil spot indications in Asia were stable to firm, with some grades moving up on the back of rising bids and offers.

On an ex-tank Singapore basis, the Group I SN150 was steady at $520/t-$540/t ex-tank Singapore, and the SN500 at $580/t-$600/t. Bright stock was also unchanged at $1,000/t-$1,020/t ex-tank Singapore.

The Group II 150 neutral cut was mentioned at $500/t-$520/t ex-tank Singapore, and the 500N was assessed at $605/t-$625/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $410/t-$430/t; the SN500 inched up by $10/t at $440/t-$460/t FOB. Bright stock was holding at $880/t-$900/t FOB this week.

In the Group II category, the 150N cut was assessed up by $20/t this week at $450/t-$480/t FOB Asia, while the 500N was also up by $20/t at $580/t-$610/t FOB Asia.

The 4 centiStoke and 6 cSt oils were largely unchanged at $850/t-$880/t FOB Asia, and the 8 cSt grade was gauged at $600/t-$620/t FOB Asia, with few discussions heard.

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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