Asia Base Oil Price Report


Activity in China and some other nations started to wind down ahead of the Lunar New Year celebrations scheduled from Jan. 27 until Feb. 2, and buying interest was lackluster throughout the rest of the region.

Base oil buyers had either rushed to finalize business before the holidays or took a break from negotiations until the New Year, depending on the status of their inventories. Many consumers had already secured product in December, because they wanted to ensure that the cargoes would arrive before the end of January so they did not need to purchase additional material.

Some downstream manufacturers reduce operating rates or suspend production during the holidays, but increase activity afterwards as they start to prepare for the spring production cycle.

Base oil producers were therefore hoping that negotiations for February and March shipments would pick up the pace after the holidays.

The recent increase in base oil indications has also kept some buyers in other countries such as India away because of concerns that prices may go down should crude oil values decline.

Crude prices have been on an incline since November, and continue to fluctuate within a narrow range above U.S. $50 per barrel, with small drops registered sporadically. Numbers were anticipated to remain fairly steady if OPEC members adhere to the output reductions agreed in late November.

Futures lost some territory this week on reports by the U.S. Energy Information Administration of a surprise increase in the nation’s crude stockpiles as refinery activity slowed down. U.S. oil production was flat in the most recent weekly report, whereas it had been steadily moving up in previous weeks.

ICE Brent Singapore March futures settled at $54.74 per barrel on Jan. 19, compared to $55.34/bbl on Jan. 16.

Base oil buyers also harbored some concerns about the potential tightening of a number of grades, in particular the heavy-viscosity cuts and bright stock.

These cuts appeared to be snug in the region and spot availability was limited, leading to higher offer levels.

Bright stock, in particular, has seen a large price jump in recent weeks because of tight supply and steady demand. Since this cut is difficult to replace with other grades in certain downstream applications, buyers sometimes do not have a choice but to accept suppliers offers.

On the local level, producers have also hiked prices of several base oils on the back of steeper feedstock and crude costs and limited spot supply.

In Taiwan, Formosa Petrochemical was heard to have increased its domestic list price for second-half January shipments. This is the second increase in one month, with a previous hike implemented at the start of the year.

This time, Formosa’s Group II 70N grade was lifted by New Taiwan Dollar 1.2 per liter, while the producer’s 150N cut was raised by 7 cents per liter. The increase on the 500N oil was 37 cents per liter. All of the increases went into effect on January 16.

In Japan, on the other hand, base stock prices were expected to experience decreases in the first quarter, despite the fact that values have been moving up in the rest of Asia. This is because the countrys base oil price leader, JX Nippon, lowered first quarter 2017 base oil prices marginally by Japanese Yen 1.1 per liter, based on the producers unique retroactive price formula, which is grounded on CIF (cost, insurance and freight) crude prices, market sources explained.

However, participants expected second quarter prices to move up – possibly by double digits – based on the same formula, to reflect rising crude oil values and a weaker yen.

As far as imports into Japan were concerned, South Korean base oil prices were heard to have remained largely unchanged in the first few weeks of the year from the fourth quarter 2016.

With market discussions slowing down on the eve of the Lunar New Year holidays and uncertainties over future price direction, Asia base oil prices were assessed as stable to slightly firmer depending on supply and demand conditions.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was unchanged at $600/t-$620/t, while the SN500 was steady at $690/t-$715/t. Bright stock was heard at $925/t-$945/t.

The Group II 150 neutral was assessed at $600/t-$620/t, and 500N was hovering at $775/t-$795/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was revised up by $10/t to $490/t-$510/t, while the SN500 was also up by $10/t at $600/t-$610/t FOB. Bright stock was unchanged at $840/t-$870/t FOB, following hefty price jumps the previous two weeks.

Within the Group II category, 150N edged up by $10/t to $510/t-$530/t, while 500N/600N was also up by $10/t at $700/t-$720/t, all FOB Asia.

In the Group III segment, prices were assessed steady, with the 4 centiStoke and 6 cSt oils holding at $725/t-$755/t, and the 8 cSt grade heard 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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