Asia Base Oil Price Report


There were differing views about potential impacts of Hurricane Harvey on Asian markets, with some expecting that plant outages in the U.S. Gulf would have immediate and substantial repercussions, and others noting that the effects may not be evident for a few weeks.

Some Asian producers have already received inquiries for volumes to be exported into the U.S. to fill the void that was likely to be left by plant shutdowns in Texas and potentially Louisiana.

There was reportedly a large gap between buying and selling ideas, but if traders manage to conclude business, the activity could lead to a tightening of supplies in Asia.

Hurricane Harvey has been downgraded to a Tropical Depression, but it was still pouring large amounts of rain along the Texas and Louisiana coasts at the end of last week, feeding concerns that additional refineries and chemical plants may be forced to shut down.

In Texas, several refineries that house base oil plants have halted operations due to flooding, including Motiva’s API Group II unit in Port Arthur; ExxonMobils Group I//II base oil plant in Baytown; LyondellBasells Group II and naphthenic base oils plant in Houston; and Valeros naphthenic base oil plant in Three Rivers. For updates on Harvey plant closures and coverage on how the industry is coping with the effects of the storm, see LubesnGreases Hurricane Harvey and the Impact on the Industry.

Aside from the production outages, the Houston ship channel and several port closings were also expected to impact the movement of product out of the region. Some ports were in the process of reestablishing services with some limitations, while others remained closed.

While the reduced domestic supply in the U.S. was likely to draw base oils from other regions such as Europe and Asia, some sources said that this would happen at a time when demand in Asia typically declines. This means that the market should not tighten dramatically, sources explained.

Buyers agreed that purchases are generally more conservative in the last few months of the year because consumers prefer not to end the year with high inventories, and only therefore only secure minimum volumes.

On the other hand, participants in India and other countries said that they typically carry buffer stocks in case of product shortages, and that they would have to utilize these if base oils shipments that were expected from the U.S. get delayed.

Some buyers underlined that most of their material was coming from Asian producers, and they did not expect any problems with deliveries or shortages, as most regional plants were running well. Other sources, however, pointed out that some producers had reduced operating rates ahead of a demand slowdown.

Taiwanese producer Formosa Petrochemical was heard to be planning to maintain the spot volumes exported to China in September from levels shipped in August, as its Group II plant was running at steady rates.

In China, Sinopec was anticipated to produce additional volumes at a number of its subsidiaries given their return to production or increased rates, but domestic demand was also expected to improve this month as lubricant producers have been carrying fairly low stock of raw materials.

Sinopec Maoming Petrochemical was heard to have restarted its Group II/III plant at the end of August, following a turnaround which started earlier this year. The plant has capacity to produce 400,000 t/y Group II/III base oils.

If the different base oil segments in Asia became tighter, there could be upward pressure on pricing, but this week, it seemed that some indications were actually going the other direction.

In Singapore, domestic price indications on an ex-tank basis were said to have been adjusted down on softer demand and adequate availability, with the light-viscosity grades in particular experiencing declines of about $10 per metric ton week on week.

In Taiwan, Formosa lowered its list prices for domestic transactions of its Group II 70 neutral, 150N and 500N base oils in September, reflecting the general market sentiment in Asia.

Formosas domestic list prices for its 70N grade decreased by New Taiwan Dollar (NT$) 5 cents per liter; its 150N oil dropped NT$ 15 cents/l; and its 500N grade fell by NT$ 59 cents/l.

Given a number of uncertainties in the market – such as the extent of the impact that U.S. Gulf plant shutdowns will have on Asian pricing – most prices remained unchanged this week, but a couple of grades underwent downward adjustments to reflect bids and offers. Trading was also subdued in some countries ahead of the Eid ul-Adha holidays.

On an ex-tank Singapore basis, Group I SN150 was steady at between U.S. $670 and $690 per metric ton. SN500 and bright stock were also unchanged at $830/t-$850/t and $920/t-$940/t, respectively.

Group II 150 neutral was revised down by $10/t to $670/t-$690/t in line with current price indications, and 500N remained steady at $880/t-$900/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was holding at $560/t-$580/t. The SN500 cut was heard at $710/t-$730/t FOB Asia and bright stock was stable at $750/t-$770/t FOB Asia.

Group II 150 neutral was heard at $570-590/t, and the 500N/600N grades were softer by $10/t at $790/t-$810/t, all FOB Asia.

In the Group III segment, prices were unchanged, with the 4 centiStoke and the 6 cSt grades at $750/t-$770/t, and the 8 cSt cut at $730/t-$750/t FOB Asia, following downward adjustments last week.

Upstream, crude oil prices fell in the wake of Hurricane Harvey, which flooded several refineries and paralyzed a quarter of the U.S. refining industry, reducing crude demand. The shutdowns sparked fears of a fuel shortage ahead of the busy Labor Day weekend in the U.S. on Sep. 4, and pushed gasoline prices up.

However, late in the week, some refineries along the U.S. Gulf began their restart process, calming some of these concerns.

ICE Brent Singapore November futures were hovering at $52.49 per barrel at the close of Asias trading on September 1, from October futures at $52.52/bbl on August 28.

Gabriela Wheeler can be reached directly at

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