Asia Base Oil Price Report


Asias base oil prices underwent few fluctuations as buyers assessed market fundamentals and product needs, while sellers evaluated supply/demand dynamics and watched crude oil values closely.

Some also focused attention on the United States base oil market, which has seen a fair amount of upheaval in the wake of Hurricane Harvey and is likely to experience more negative effects from Hurricane Irma, which battered islands in the Caribbean and vast areas of Florida, Georgia and South Carolina.

While there are few refineries and production plants in that part of the U.S., some participants were concerned that U.S. refineries would start to favor production of gasoline and transportation fuels over base oils, as a tightening of these products was expected following the shutdowns caused by Harvey.

Some of the refineries that had been forced to shut down by the severe flooding brought about by the hurricane were in the process of restarting, including ExxonMobils Baytown unit and Motivas Port Arthur refinery. However, it could not be ascertained whether the base oil plants at these locations were in the process of restarting as well.

There were reports that Motivas API Group II unit at Port Arthur had suffered some damage due to flooding and that the restart would take slightly longer than expected, but this could not confirmed with the producer directly.

Several U.S. base oil producers export product to Asia on a regular basis, which is why Asian players were keeping an eye on the situation there.

Meanwhile, a number of countries in Asia were dealing with severe weather and floods of their own, according to local media reports.

An estimated 40 million people in South Asia were heard to be struggling to rebuild their lives after massive floods devastated the region nearly a month ago.

Entire villages across Bangladesh, India and Nepal remained inundated since the floods began in mid-August. Authorities have described the floods as the region’s worst in 40 years. In India alone, UNICEF estimated 31 million people were affected by the floods.

Recovery in these areas was expected to take a minimum of six months to a year, as local authorities coordinate efforts to collect the debris and rebuild houses. The weather-related issues affect industrial and commercial activity and ultimately have an impact on lubricant consumption.

There were also typhoon-related flooding and logistical issues reported on the western coast of Japan, Hong Kong, Taiwan and China.

In China, port activity has recently been impaired by inclement weather, but regular activity was heard to have been restored.

Base oil demand in China has dipped because finished lubricant producers have been very conservative in terms of securing cargoes, as lube requirements from the automotive segment have dropped over the last few months.

The slowdown was thought to be related to a reduction in automotive sales compared to the same period last year. Passenger car sales are still on track to grow by 5 percent this year, but this number is significantly lower than the 13.7 percent rate registered in 2016. This was the fastest pace in three years, thanks to a tax cut on small-engine cars, Reuters reported.

The sales tax on cars with engine capacity of 1.6 liters or less was cut to 5 percent in 2016 from 10 percent in late 2015, but rose again to 7.5 percent in 2017, and will return to 10 percent next year.

Another factor that was expected to slightly increase oversupply in China was resumption of base oil plants production.

One of these units was Sinopec Maoming Petrochemicals 400,000 metric ton per year Group II/III base oil plant, which resumed production in late August following several months of remaining off-line.

The base oil grades that were anticipated to be more readily available were the high-viscosity cuts, because blenders typically switch to lighter formulations during the winter months. Light-vis oils were expected to see more demand.

In Japan, base oil prices underwent an upward revision in July, following gains on crude prices in previous months. Japanese domestic pricing is formula-based and is calculated on a cocktail, of values, such as the price of imported crude oil and CIF naphtha numbers.

However, sources said that the base oil market in Japan has turned very competitive in recent years as demand had been shrinking and the number of producers has also decreased, with some suppliers willing to negotiate pricing with their customers despite formula-based values.

Asian participants felt that there were still many uncertainties plaguing the base oil market, and were hesitant to commit to fresh business. Given the lack of reported transactions, spot prices were mostly assessed as unchanged this week.

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

Group II 150 neutral was steady at $670/t-$690/t, and 500N was unchanged 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 assessed at $710/t-$730/t FOB Asia and bright stock was stable at $750/t-$770/t FOB Asia.

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

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

Upstream, crude oil prices edged up on Monday, as refineries on the U.S. Gulf planned restarts, and Saudi Arabia considered the possibility of extending a deal to curb output among major producers.

ICE Brent Singapore November futures were hovering at $53.59 per barrel at the close of Asias trading on September 11, from $52.06/bbl on September 4.

Gabriela Wheeler can be reached directly at

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