Asia Base Oil Price Report


Participants in Asia were striving to determine market direction before concluding October business, but price prospects were not clear, and activity was expected to be muted in some countries for the observance of local holidays.

While the implications of U.S. hurricanes Harvey and Irma on other regions could not be thoroughly assessed, market players in Asia were aware that the tightening of API Group II supplies in the U.S. and related price movements were likely to affect Asian business.

Indeed, two U.S. suppliers – Flint Hills Resources and Chevron – announced posted price increases of 11, 12 and 14 cents per gallon for domestic transactions of their various grades last week, on the back of snug supplies and steady demand.

The U.S. typically exports Group II spot cargoes to Asia, as well as to Europe and South America, when there is ample availability to cover contractual obligations. But with the recent tightening of supplies, there is likely to be a lack of extra volumes, sources said.

Within the Group III segment, South Korean and Middle East producers were heard to have shipped several large cargoes of Group III supplies to the U.S. to cover the product shortfall from the unexpected outage at the Shell-Qatar Petroleum GTL plant in Ras Laffan, Qatar, during the first half of the year.

The plant has since restarted and there was less of a need to supply those buyers who had turned to alternative base oils to fill some of the supply gaps.

However, with the current production outages affecting the Group II segment in the U.S., there was speculation that there would be an increase in Group II and III cargoes shipped from Asia and the Middle East once again.

The heightened export opportunities come at a time when demand in Asia traditionally dwindles as activity in downstream segments tends to be less vibrant than earlier in the year.

Indeed, export movements from Thailand and Indonesia have increased over the last couple of months, as local producers have found themselves in possession of extra spot availability because of lower domestic demand.

At least one cargo from an Indonesian Group I producer was heard to have been booked into China for September arrival, and a second one may be lifted at a later date.

Asian producers sometimes also resort to lowering operating rates at their facilities towards the end of the year to balance inventories against requirements.

In Taiwan, Formosa Petrochemical was heard to be planning to reduce the operating rates at its Group II facility in Mailiao between November and December to about 80 percent capacity. The unit can produce 600,000 metric tons per year of Group II base oils, including 70 neutral, 150N and 500N, according to LubesnGreases Guide to Global Base Oil Refining.

Although the reduction would be prompted by a turnaround at an upstream crude oil processing unit, the cut would also coincide with declining local demand, according to sources.

Aside from supplying the local market in Taiwan, Formosa regularly exports Group II spot cargoes to China. However, the producer was expected to suspend spot exports during the last two months of the year to give priority to contractual requirements.

Further down the road, it was heard that SK Lubricants was planning to take its large Group II and III base oil plant in Ulsan, South Korea, off-line in March next year, although no producer confirmation was forthcoming. The plant can produce 701,000 metric tons per year of Group II and 1,267,000 t/y of Group III base oils.

In India, buyers were keeping a concerned eye on the snug supply conditions for Group I base stocks in the Middle East, particularly in Iran, because of two plant shutdowns there. Indian consumers often supplement local production of Group I with imports from the Middle East.

One of the Iranian producers, Sepahan Oil, was heard to be in the process of restarting its 420,000 t/y Group I plant in Esfahan, with fresh shipments of heavy-vis oils expected to be completed into India this month. Price indications for SN500 cargoes of Iranian origin were understood to have moved up by $20 to $30 per metric ton from last week given the narrow supply, with current ideas hovering at around $700/t-$705/t FOB. There was no producer confirmation forthcoming about the status of the plant.

There was also talk about some cargoes of Group III base oils moving from the UAE into India in late September or early October. Indian consumers have increasingly turned to Group III oils as prices were deemed quite competitive against some Group II offers.

While the general upward price pressure was said to be strong, given the current tightening of supply and increases in crude oil values, spot prices in Asia were assessed as largely unchanged this week in the absence of active trading.

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

Group II 150 neutral was heard at $680/t-$700/t, and 500N was heard at $890/t-$910/t ex-tank Singapore.

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

Group II 150 neutral was steady at $580-600/t, and the 500N/600N grades were gauged at $800/t-$820/t, all FOB Asia.

In the Group III segment, prices underwent little fluctuation, 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.

While supply/demand fundamentals were placing upward pressure on spot indications, recent gains in crude oil values were playing a significant role on producers’ price expectations as well.

Crude prices increased over the last couple of weeks on the back of improved demand forecasts, geopolitical tensions related to North Korea, a referendum by Iraqi Kurds, and the ongoing OPEC agreement intended to curb global crude production.

However, October marks the beginning of the last quarter of the year when crude oil typically weakens. The year 2016, however, appears to have been an exception in that crude gained more than 11 percent in the final months due to the OPEC-arranged deal.

On Monday this week, crude oil futures turned lower on news of an increase in Iraqi production and a rise in U.S. oil rig counts.

ICE Brent Singapore December futures were trading at $56.60 per barrel at the close of Asias session on October 2, from $56.91/bbl on September 25.

Gabriela Wheeler can be reached directly at

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