Asia Base Oil Price Report


Divergent currents are roiling the Asian base oils market, with weakening demand and ample supply of certain grades exerting downward pressure on pricing and steep crude oil values pushing up indications.

Many base oil grades – particularly the API Group II oils – had been in a tight position in the region so far due to the ongoing turnaround at a major producer’s plant in Taiwan.

But this situation is about to change, as Taiwanese producer Formosa Petrochemical – which embarked on a two-month maintenance shutdown back in June – is expected to restart production at the end of the month.

The producer suspended spot shipments to China and other countries a few months ago to build inventories ahead of the outage, and also reduced volumes shipped under contract.

With the anticipated resumption of output at Formosa’s facility in Mailiao, and the seasonal downturn in requirements, most Group II grades are likely to become more abundant. The end of the summer and imminent arrival of the fall season typically mark the start of a less dynamic period in the downstream finished lubricants segment in most countries of the region as well.

Additionally, industrial activity in eastern China has slowed down ahead of the G20 summit taking place in Hangzhou, Zhejiang province, on Sept. 4-5. Many plants, including numerous petrochemical facilities, have shut down or lowered operating rates to comply with government directives in an effort to reduce air pollution during the summit.

China and the United States are anticipated to jointly announce their ratification of a landmark climate change pact shortly before the G20 meeting. The countries participating in the G20 summit are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, and the United States. The European Union will also be represented.

Another element that has been affecting base oil buying appetite in the region is that several large cargoes of Group I and Group II products had been imported from the Middle East, Europe and the U.S. in previous months, reaching Asian ports mostly in May and June.

Many end-users and importers have therefore been able to secure supplies to cover immediate requirements, and did not seem pressed to purchase additional cargoes. Buyers preferred to wait as they hoped prices would edge down.

Availability of Group I cuts also seemed to be lengthening, which has resulted in downward spot price adjustments, mainly on bright stock.

Bright stock spot prices fell between U.S. $40 per metric ton to $80/t since the beginning of the month, and saw further softening during the week, with reductions of around $10/t.

At the same time, fluctuating crude oil numbers were making it difficult to predict base oil price direction, with rising values in previous weeks and increasing base oil prices in the U.S. lending the market a more bullish sentiment.

U.S. producer Chevron increased its Group II base oils by 20 cents per gallon on August 24 “to reflect the current supply/demand balance and market conditions,” a company source said.

Crude futures had been on an upward trend on expectations that members of OPEC would discuss an output freeze at an upcoming international energy meeting in September.

However, oil values fell during the week on an unexpected increase in U.S. crude stocks that rekindled concerns about the supply glut that has curbed prices for the past two years.

ICE Brent Singapore October futures were trading at $49.10 per barrel in afternoon sessions on August 29, compared to $50.01 per bbl on Aug. 22.

Asian base stock spot assessments were largely flat this week given subdued trading, with bright stock showing slight downward revisions on weaker market conditions.

On an ex-tank Singapore basis, the Group I solvent neutral 150 cut was steady at $590/t-$610/t, while the SN500 was assessed unchanged at $680/t-$700/t. Bright stock edged down $10/t to $950/t-$970/t.

The Group II 150 neutral was holding at $590/t-$610/t, while the 500N was also unchanged at $780/t-$800/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $480/t-$500/t, and the SN500 was trading near $600/t-$620/t FOB. Prices for bright stock dropped by $10/t to $800/t-$820/t FOB due to weaker demand.

In the Group II category, the 150N cut was hovering at $530/t-$550/t FOB Asia, while the 500N/600N was assessed at $690/t-$710/t FOB Asia.

Within the Group III tier, the 4 centiStoke and 6 cSt oils were steady at $820/t-$850/t FOB Asia, while the 8 cSt grade was near $660/t-$680/t FOB Asia.

In supply-related news, Chevron Corp.’s affiliate in Singapore, Chevron Singapore Pty Ltd., has signed an agreement with Caltex Australia Petroleum Pty Ltd. to become an authorized distributor of Chevron’s premium Group II base oils in Australia, the company announced in a press release.

Given limited production of premium base oils in Australia, the company hopes to offer base stocks to meet stricter lubricant specifications and minimize import complexities for lubricant formulators.

Products sold in Australia will include Chevron’s Group II neutral base oil 100R, 150R, 220R and 600R.

Gabriela Wheeler can be reached directly at

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

Related Topics

Base Oil Reports    Base Stocks    Other