Asia Base Oil Price Report


Activity in Asia was still somewhat subdued, but this was not unexpected given that base oil and finished lubricant demand tends to slow in the last quarter.

One reason for the weaker buying appetite is the fact that base oil users prefer to carry minimum inventories into the new year and therefore limit purchases to volumes necessary for day-to-day operations.

Uncertainty over price direction was also dampening interest in base oils. Feedstock costs have been moving up, but plentiful base oil supplies and lackluster demand have been lent a bearish tone to price indications. Buyers dont want to risk buying large cargoes of base oils, only to see prices edge down a few days later, and therefore caution pervades their purchases.

Another trend that has become apparent is that many users are favoring local product over imports because it appears that domestic prices are more competitive than imports in some markets. Purchasing locally also reduces risks associated with longer lead times, as prices may have changed by the time the product reaches the buyer.

This appears to be the case in Taiwan, where the local producer Formosa Petrochemical Corp. has lowered domestic list prices for October shipments so as to entice buyers to source local product instead of securing imports. Formosa was heard to have restarted its API Group II plant in late September after a two-month turnaround, and this resulted in increased supply of Group II spot cargoes. A large portion of Formosa’s production is exported to China under contract and spot transactions.

Chinese blenders and importers have generally turned cautious about spot imports because domestic supply levels have improved, and there is ample availability of a number of grades. Importers are also holding adequate stocks and are not in a hurry to buy large volumes from regional sellers.

The higher base oil production rates in China, coupled with a slowdown in demand from the finished lubricants sector, has resulted in lower price indications for base oils, in particular for the heavy-viscosity cuts that are not used as extensively during the cold winter months.

While the general base oil price trend in Asia has been downward, Japan appears to be an exception in that base oil values have increased during the fourth quarter. This is because pricing is calculated based on a cocktail of prices, including CIF naphtha prices, which have trended up as crude oil costs rose.

The base oil price increases in Japan are different for each major oil company and for each customer, sources said. Furthermore, currency fluctuations have had a mitigating impact on the hikes. While crude prices went up, the exchange rate offset some of the price differentials, so the increase is minor and not as drastic as when prices were dropping, a local source commented.

At the same time, the current exchange rate is making exports from Japan less attractive, sources added.

Japanese participants said that there was some resistance to the increases – with production in downstream segments still not up to full capacity – but sellers hope that the hikes can be pushed through. Some production hiccups were attributed to adverse weather and the typhoons that hit Japan over the summer.

Asian base oil prices were assessed stable to soft this week as some grades underwent moderate downward revisions on the back of subdued buying interest and plentiful availability. On an ex-tank Singapore basis, API Group I solvent neutral 150 was assessed unchanged between $585 per metric ton and $605/t, while SN500 was steady at $665/t-$695/t. Bright stock was heard at $930/t-$950/t.

Group II 150 neutral was gauged at $585/t-$605/t, and 500N was down by $5/t at $760/t-$780/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was holding at $470/t-$490/t while the SN500 was lower by $5/t at $585/t-$605/t. Bright stock was down by $10/t at $780/t-$800/t.

In the Group II category, 150N was unchanged at $480/t-$500/t, while 500N/600N was down by $5/t at $645/t-$665/t, all FOB Asia.

The Group III tier underwent no fluctuations, but prices remained under downward pressure due to increased global availability of Group III oils. Four centiStoke and 6 cSt oils were heard at $790/t-$820/t, FOB Asia, and the 8 cSt grade was hovering at $650/t-$670/t FOB Asia.

Upstream, crude oil prices dipped and then rose again as the American Petroleum Institute reported an unexpected fall in U.S. crude stocks. Futures had fallen after the International Energy Agency revealed that global crude oil supplies had increased by 600,000 barrels per day in September, primarily due to a rise of half a million barrels from Russia and Kazakhstan.

ICE Brent Singapore December futures were trading at U.S. $51.94 per barrel on Oct. 24, compared to $51.89/bbl for November futures on Oct. 17.

In related industry news, Formosa Petrochemical Corp posted an 11.36 percent year-on-year drop in September revenues to 40.87 billion New Taiwan Dollar (or approximately U.S. $1.29 billion), and close to a 2 percent month-on-month decrease, according to the company’s website.

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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