Asia Base Oil Price Report


A softer tone is emerging in some Asian base oil segments, while seesawing crude oil prices are making buyers limit their base stock purchases.

Crude oil prices fell to their lowest levels since April this week, and then bounced back after United States government data showed a larger than expected gasoline inventory drawdown that offset a build in crude stockpiles.

However, the gains could be short-lived, market analysts warned, as the industry enters the last two quarters of the year with restored production in Canada and Nigeria – following earlier disruptions – and many refineries starting maintenance programs.

ICE Brent Singapore October futures were trading at $44.78 per barrel in afternoon sessions on August 8, compared to $43.30 per bbl on Aug. 1.

While spot prices of many base oil grades saw little to no fluctuation over the week, others have started to lose ground on declining demand and the lower crude oil values observed during the previous two weeks.

Just as base stock producers had started to recover margins – which had been squeezed during the second half of 2015 and early this year – pressure for lower base oil pricing has started to build.

Furthermore, with the approach of the fall/winter season and an expected decrease of demand from some of the downstream lubricant segments, participants expect base oil demand to slow down, which could place further downward pressure on price ideas.

Sellers are generally holding on to spot pricing, but bids were heard to be taking place at lower levels than in previous weeks, sources said.

The softening trend was evident in Taiwan, where producer Formosa Petrochemical was heard to have reduced its list prices for August shipments of API Group II base oils.

Formosa’s 150 neutral grade was heard to have been lowered by New Taiwan dollar 0.41 per liter compared to July list prices, while its 500N was marked down by NT$1.03/l, according to market sources. The producer had lifted its list prices in July.

Participants speculated that the drop was partly attributed to expectations of increased availability of Group II oils in the region once Formosa resumes production.

Formosa’s 600,000 metric tons per year plant in Mailiao, Taiwan, is undergoing a routine turnaround and is anticipated to be brought back online in late August. Formosa had suspended spot shipments of its base oils into China and other destinations and curtailed its availability to contract customers in preparation for the turnaround.

Buyers and importers secured base oils from other suppliers in Northeast and Southeast Asia, Europe and the U.S. to make up for the shortfall, but this activity appears to be temporarily slowing down, particularly in China.

Despite the arrival of large quantities of imports, and additional capacity coming on stream over the next few months, China’s growing demand for base oils will continue to be difficult to meet, particularly as far as high-performance oils are concerned, industry sources said.

Given the flourishing number of automobiles in China and the need for more premium fuels and lubricants, many refiners are focusing on expanding production of Group II and Group III base oils in the country.

One of these producers is Hainan Handi Sunshine Petrochemical, which signed a technology licensing agreement with Honeywell UOP and ExxonMobil on Aug. 3.

According to the agreement, Honeywell will install its unicracking technology, while ExxonMobil will supply its MSDW catalytic lubes dewaxing technology for the Hainan Handi facility in Hainan, China, to produce premium fuels and lubes, Honeywell UOP stated in a press release.

The number of automobiles in China reached nearly 300 million in 2015 and is forecast to reach 600 million by 2025, said Dave Andrew, vice president of ExxonMobils global catalysts and licensing business. The rapid growth of new automobiles in China is driving growth in demand for premium lube oil, which underscores the importance of this technology.

Hainan Handi currently operates a 300,000 t/y Group II plant in the Hainan Yangpu Economic Development Zone and plans to add 100,000 t/y of Group II/III capacity in late 2017, a company source told Lube Report Asia this week.

Meanwhile, in India, demand was said to have remained fairly healthy, with both domestic supplies and European imports meeting most of the local Group I requirements over the last few weeks.

Discussions involving Middle Eastern product have picked up, following a subdued trading period during the Eid holidays in the region.

Prices were assessed as steady, with indications for Group I solvent neutral 150 hovering at around U.S. $560/t-$570/t CFR India, SN500 at $640/t-$660/t CFR India and bright stock at $920/t-$940/t CFR India.

Asian base oil price assessments underwent few adjustments this week, as trading remained thin and players preferred to delay deals as long as possible in order to gain a better understanding of price direction. Only a couple of grades were revised to better reflect current discussion levels.

On an ex-tank Singapore basis, the Group I SN150 cut was holding at $550/t-$570/t, but the SN500 was up by $20/t at $680/t-$700/t. Bright stock slipped by $10/t to $1,000/t-$1,020/t.

The Group II 150N was unchanged at $590/t-$620/t, and the 500N was assessed at $780/t-$800/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was steady at $450/t-$470/t and the SN500 was holding at $620/t-$640/t FOB. Bright stock moved down by $10/t to $900/t-$920/t FOB, with many bids also heard below these levels.

In the Group II category, the 150N cut was gauged at $550/t-$570/t FOB Asia, while the 500/600N was steady at $720/t-$740/t FOB Asia.

Within the Group III tier, the 4 centiStoke and 6 cSt oils were unchanged at $840/t-$870/t FOB Asia, while the 8 cSt grade moved up by $10/t to $650/t-$680/t FOB Asia.

Gabriela Wheeler can be reached directly at

LNG Publishing shall not be liable for commercial decisions based on the contents of this report.

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