Asia Base Oil Price Report


From all indications, market sentiment was fairly optimistic in the first few days of the new year since prices were bobbing up instead of fizzling as had been the case last January.

Aside from the financial turmoil in China and slumping crude oil prices that had been largely to blame for the downward trend in base oil pricing at the beginning of 2016, industry-specific fundamentals had also been quite different from those currently at hand.

Though some sectors of the base oil market continue to be weighed down by oversupply and heavy inventories, others, such as the heavy-viscosity tiers, are entering the year on tighter conditions, lending support to more stable spot pricing.

This is partly a carryover from turnarounds in the second half of 2016, when a number of Asian API Group I and II plants underwent routine maintenance and spot availability became more limited.

Output cutbacks and the diversion of feedstock streams to production of heating oil and transportation fuels also contributed to a snug base stock scenario in the fourth quarter.

But the most influential factor in the upward price trend observed during the last few weeks of 2016 and first days of 2017 was undoubtedly the price of crude oil.

Crude futures have surged by more than 20 percent since early November, and are likely to remain firm if the recently agreed production cuts by OPEC and non-OPEC members are implemented, analysts said.

Brent futures were trading close to U.S. $47 per barrel in early November, and are currently hovering at or above $56/bbl. ICE Brent Singapore March futures settled at $56.81 per barrel on Jan. 9, compared to $57.09/bbl on Jan. 3.

Oil prices rose during the week after Saudi Arabia started discussions with customers about a reduction in crude sales as a result of OPEC’s plan to curb the global supply glut.

Given the recent rise in oil and feedstock costs, base oil producers margins have been squeezed, which prompted many regional suppliers to hike their offers.

According to reports, spot prices of some cuts edged up by $10/t-$20/t in December and continue to be exposed to upward pressure. This is particularly true in regards to the heavy-viscosity grades in the Group I and II categories, as they are less readily available.

Group I values were expected to be stable to slightly firmer during January and February as supply and demand were deemed fairly balanced.

Additional, little new capacity was expected to come on stream during the year, with worldwide production actually expected to drop as Group I plant rationalization continues.

The price of imports from other regions such as the Middle East – which had been considered a competitive option in countries such as India – have also started to inch up, making local pricing more attractive.

Asian Group I and II producers have not only lifted offers for export cargoes, but have raised local values to local customers as well.

In Taiwan, Group II producer Formosa Petrochemical was heard to have increased its domestic list prices for January on higher production costs and tight availability.

The producers January list price for its 70 neutral grade moved up by New Taiwan dollar 0.74 cents per liter, while its 150N grade edged up by 0.54 cents/l. Formosas heavy-vis grade 500N was lifted by the largest amount, NT$ 1.56/l, reflecting the tighter conditions for this cut against steady demand.

Despite the fact that market participants were gradually returning to the market following the yearend holiday, trading was still relatively subdued, resulting in a limited number of concluded business.

However, activity is expected to pick up over the next few days ahead of the Lunar New Year, which starts on January 28 – almost a month earlier in 2017 versus previous years.

Market participants said that many deals had been concluded in December, as buyers wanted to ensure delivery in January because many businesses in China, Taiwan, and other countries close during the festivities, while some buyers were hoping to finalize business before base stock prices increased further.

Others aim to pad inventories ahead of the Lunar New Year to have enough raw materials to restart production after the holiday, when preparations for the spring season begin.

Spot prices in Asia were assessed as stable to firm, with some numbers being notionally revised up on the back of steeper bids and offers.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was heard at $590/t-$610/t, while the SN500 and bright stock were unchanged at $670/t-$695/t and $915/t-$935/t, respectively.

The Group II 150 neutral was steady at $590/t-$610/t, and 500N at $765/t-$785/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $470/t-$490/t, while the SN500 was revised up by $5/t to $580/t-$590/t FOB. Bright stock was up by $10/t to $800/t-$810/t FOB on higher discussions.

Within the Group II category, 150N was hovering at $490/t-$510/t, while 500N/600N was up by $10/t at $650/t-$670/t, all FOB Asia.

In the Group III segment, the 4 centiStoke and 6 cSt oils were steady at $725/t-$755/t, while the 8 cSt grade was also unchanged at $650/t-$670/t, all 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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