Asia Base Oil Price Report


Fundamentals were pulling base oil prices in opposite directions, with higher feedstock costs exerting upward pressure, and soft demand coupled with plentiful availability dampening the potential of prices moving up.

Crude oil futures posted gains this week, boosted on Thursday by the United States Energy Information Administration reports of a larger-than-expected draw in U.S. crude inventories, together with talk about Iran withdrawing from the nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA).

The U.S. has already pulled out of the JCPOA and is set to re-impose its sanctions targeting Iran’s oil sales after Nov. 4, removing up to 1 million barrels per day of global oil supply, S&P Global Platts reported.

An Iranian withdrawal from the JCPOA would likely lead to the European Union re-imposing its sanctions on Iran, including bans on European purchases of Iranian oil. Europe is currently a key buyer of Iranian oil.

In terms of consequences for Asian countries, South Korea and Japan are in discussions with the U.S. government to obtain waivers to be able to continue importing Iranian oil and condensates.

The possibility of reduced Iranian exports drove Brent crude futures up, and analysts predicted that the market would remain bullish, following a short period in late June and early July when it was likely oversupplied.

On Thursday afternoon, Brent October futures were trading at $77.39 per barrel on the London-based ICE Futures Europe exchange, compared to $74.68/bbl on Aug. 23.

Meanwhile, Asian supply of most base oil grades appeared to be ample, although some tightening was expected as a result of ongoing and upcoming turnarounds in the region.

In China, PetroChina was heard to have started a turnaround at its plant in Karamay earlier this month. The plant’s capacity is 700,000 t/y of Group I and 600,000 t/y of naphthenic oils. The turnaround was understood to affect only the paraffinic lines and was expected to last approximately 45 days.

Taiwanese producer Formosa Petrochemical had been anticipated to bring its Mailiao Group II plant back on stream in September, following a two-month turnaround, but the restart has now been postponed until October.

It was heard that the unplanned delay had forced the supplier to temporarily suspend its shipments of base oils to China for the month of September, causing domestic prices to rise in that country.

Formosa regularly ships large amounts of Group II oils to China, both under spot and contract arrangements, equaling to almost 15 percent of all base oil imports into the country.

Shipments to other destinations would also be put on hold, but it was not clear whether the producer would continue to supply domestic accounts – which are the company’s priority – from its existing inventories.

There was talk that while the extended turnaround at Formosa’s Group II plant had limited spot availability into China, the imminent completion of an expansion at Hyundai Oilbank/Shell‘s base oil plant in Daesan, South Korea, would likely mean that there would be additional material available for export soon. The South Korean producer has been moving product to China and other Asian destinations ever since its start-up back in 2014.

Group III tonnage was also heard to be plentiful as movements continue for Middle East product with partial and full approvals. This has brought about competitive offers from regional suppliers who have been trying to protect their market share, sources said.

Regional availability of Group III base stocks could be restricted when SK Lubricants takes its plant in Ulsan, South Korea, off-line next month for maintenance work that is mandated every five years. The plant can produce 701,000 t/y of Group II and almost 1.3 million t/y of Group III base oils.

The Group I segment was described as tight, as plant rationalizations and limited exports from Iran due to U.S. restrictions on business deals with the Middle Eastern nation have limited availability of Group I base stocks to countries such as India. Supply from Europe was also heard to be snug.

This week was considered to be a transitional period for base oils, with both producers and consumers appraising market fundamentals and planning to conclude negotiations for September shipments in the next few days.

Spot prices were therefore largely flat, with ex-tank Singapore numbers seeing little change from a week ago. Group I solvent neutral 150 was heard at $760/t-$780/t, while SN500/600 was unchanged at $860/t-$880/t. Bright stock prices were assessed at $925/t-$945/t, all ex-tank Singapore.

Group II ex-tank Singapore assessments were also steady, with the 150 neutral heard at $805/t-$835/t, and 500N at $890/t-$910/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed at $700/t-$720/t, while SN500 was holding at $820/t-$840/t. Bright stock was hovering at $850/t-$870/t FOB Asia.

Group II 150N was unchanged at $750/t-$770/t, while 500N/600N were at $820/t-$840/t, all FOB Asia.

In the Group III segment, 4 and 6 centiStoke grades were heard at $870-$890/t and $850/t-$870/t, respectively, while 8 cSt was assessed at $760/t-$780/t, FOB Asia.

Gabriela Wheeler can be reached directly at

LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.

Related Topics

Base Oil Pricing Report    Base Stocks    Other