Asia Base Oil Price Report


A sense of uncertainty is holding back base oil trading, as participants keep a watchful eye on supply and demand fundamentals while carefully tracking developments in the crude oil sector.

Following several weeks of an uptrend in crude oil futures, values underwent the largest drop in a month, plunging to levels below U.S. $44 per barrel.

West Texas Intermediate futures fell after United States crude inventory data showed stockpiles had grown by an unexpected 2.3 million barrels in the week ending Aug. 26. Analysts had forecast an increase of 921,000 barrels.

Anticipation of a higher dollar if the U.S. Federal Reserve starts to hike rates also had a negative impact on oil prices.

Additionally, there were fizzling hopes that OPEC members would agree to an output freeze on the sidelines of an upcoming international energy meeting in Algeria on Sep. 26-28.

Brent had risen almost $10 per bbl through early August to a high above $51 per bbl on expectations that the worlds biggest oil producers would try to prop up oil prices, which have been weighed down by a global supply glut.

However, downward pressure made ICE Brent Singapore November futures fall below $47 per bbl to $46.86 per bbl in afternoon sessions on Sep. 1. Prices on Sept. 5 stood at $48.41 compared to $49.10 per bbl on Aug. 29.

Fundamentals in the base oil market have also started to shift as the segment enters a less active fall season.

Demand for finished lubricants typically weakens at the start of the fall due to a slowdown in engine oil demand and industrial output. Base oil requirements decline as a consequence.

This year, the trend will be accompanied by an increase in base oil availability as a major producer resumes output following a maintenance shutdown, while another supplier will be starting new production.

Taiwanese producer Formosa Petrochemical was anticipated to restart production this week after a two-month turnaround at its 600,000 metric tons per year API Group II plant in Mailiao. The restart date could not be confirmed with the producer.

Although Formosas supply is not expected to hit the market immediately, there are expectations that spot availability will improve in coming weeks, which was impacting price sentiment, according to sources.

China National Offshore Oil Co. was also expected to start production this month at its new 400,000 t/y Group II base oil plant in Taizhou, Jiangsu province. The plant is anticipated to manufacture around 200,000 t/y of naphthenic stocks as well, according to LubesnGreases Guide to Global Base Oil Refining.

Hainan Handi Sunshine also plans to add new capacity to the Chinese base oil supply system, but not until 2017. Hainan Handi is building a Group II/III plant – its second in Hainan province – with a total production capacity of 800,000 t/y, according to company sources. The producer currently operates a 300,000 t/y Group II plant in the Hainan Yangpu Economic Development Zone.

There are no significant outages expected in the region until the fourth quarter, when S-Oil reportedly has slated a turnaround at its plant in Onsan, South Korea, which could tighten supply once again. S-Oil can produce 26,000 t/y of Group I, over 1 million t/y of Group II and around 1 million t/y of Group III oils at its Onsan facilities.

With the current supply and demand conditions in mind and slipping feedstock prices, buyers pressed suppliers to reduce base oil numbers for September shipments.

In some cases, suppliers lowered their spot offers to stimulate sales, with bright stock within the Group I segment, and the heavy-viscosity grades in the Group I and Group II categories showing downward price revisions this week.

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 notionally lower by $10/t at the low end of the range at $670/t-$700/t. Bright stock slipped by $10/t to $940/t-$960/t.

The Group II 150 neutral was holding at $590/t-$610/t, while the 500N was down by $10/t at $770/t-$790/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $480/t-$500/t, and the SN500 was trading at about $590/t-$610/t FOB. Prices for bright stock dropped by $10/t again to $790/t-$810/t FOB.

In the Group II category, the 150N cut was holding at $530/t-$550/t FOB Asia, while the 500N/600N was assessed down by $10/t at $680/t-$700/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 also unchanged at $660/t-$680/t FOB Asia on thin trading.

In related news, Chinas automobile market thrived in July as buyers took advantage of the tax cut for small displacement engine cars and a booming interest in SUVs, reported.

Delivery of passenger cars and commercial vehicles surged 23 percent in July from a year earlier to 1.85 million units, according to statistics released by the China Association of Automobile Manufacturers.

Engine displacement of 1.6 liters or less made up 71 percent of the passenger car sales, and sales of these small-engine cars rose 38.6 percent in July. Sales of small cars have been boosted by 5 percent thanks to a 50-percent vehicle purchase tax cut implemented last October.

However, analysts said car sales slowed down in August, and warned that they would likely decline significantly once the tax break expires at the end of the year.

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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