Asia Base Oil Price Report


Market participants were monitoring crude oil prices, together with developments related to severe weather conditions in the United States, which could cause logistical issues in coming weeks.

Hurricane Florence was expected to make landfall on Thursday evening, and bring torrential rains and hefty winds on coastal areas in the states of South Carolina, North Carolina, and Virginia.

While there are no base oil plants located in these areas, there are a few lubricant blending plants, and participants expected these facilities to be shut down ahead of the storm, together with disruptions to logistics and deliveries, as there have been mandatory evacuations and roads would not be able to be utilized for commercial transport.

There could also be an impact on other parts of the U.S., as priority would be given to the movement of fuel by truck and rail to the areas affected by the storm, as well as an increase in the use of vehicles for emergency purposes.

The approach of the hurricane also had an impact on crude oil prices, which climbed to their highest finish since July earlier in the week, but tumbled on Thursday, as an industry report showed global supplies at a record, OPEC output jumping in August, and Hurricane Florence weakening ahead of its expected landfall.

On Thursday afternoon, Brent October futures were trading at $78.41 per barrel on the London-based ICE Futures Europe exchange, compared to $76.08/bbl on Sep. 6.

Sluggish demand and fairly ample availability of most base oil grades were hampering efforts by producers to mark up base oil offers. Suppliers commented that margins were being squeezed by steeper crude oil and feedstock values, and there was little chance to improve them because of buyer resistance.

Consumers have not been concerned about product shortages as the market appears well supplied, not only by regional suppliers, but also through product coming from the Middle East. Movements for product from the U.S. have declined, as it has been difficult to make numbers work and demand has not been particularly strong, sources said.

Regional supply of API Group II should improve with the restart of Formosa Petrochemicals plant this month, following an extended turnaround which started in early July. The plant in Mailiao, Taiwan, can produce 600,000 metric tons per year of Group II base oils. Although Formosa had been earlier heard to have postponed its restart to October, it appears the producer is ready to bring the plant back on line by next week.

Aside from more Group II coming back into the market shortly as Formosa resumes production, sources speculated that there would be more regional volumes available in the near future, as less product might be moving from Asia to Europe, once the ExxonMobil plant in Rotterdam comes on stream. The refiner was scheduled to complete the 1 million t/y plant by the end of the year, with commercial product likely hitting the market in Q1 2019.

Group I demand was heard to be holding, although given that Group II prices have been close to, or even below those for some Group I counterparts, a number of users have opted for securing the higher-performance base stocks, even in applications that do not require Group II cuts.

Production of Group I base stocks has been steady in China, but buyers were heard to prefer Group II oils whenever possible, and more Group II cargoes were expected to become available both from Formosa and from Hyundai Oilbank/Shells expanded base oil plant in Daesan, South Korea. The unit was taken off-line in mid-August, and the 250,000 t/y Group II expansion was slated to be completed in late September.

In India, there has been a slight reduction of Group I quantities moving from Iran, possibly because of U.S. sanctions looming on the horizon, which could make transactions with Iranian entities more difficult.

However, given the availability of local Group I cuts from domestic producers, together with competitively-priced imported Group II base stocks, the decrease in Iranian imports was not expected to have a significant impact.

A turnaround at SK Lubricants Group II/III plant in Ulsan, South Korea, starting this month, could result in reduced spot availability of these grades in the region. The plant can produce 701,000 t/y of Group II and almost 1.3 million t/y of Group III base oils.

Base oil spot prices were flat from the previous week, with buyers and sellers in the midst of discussions for September shipments, and some participants also evaluating needs for the next few months.

Ex-tank Singapore numbers were assessed unchanged week on week, with Group I solvent neutral 150 heard at $760/t-$780/t, and the SN500/600 cuts at $860/t-$880/t. Bright stock remained at $925/t-$945/t, all ex-tank Singapore.

Group II ex-tank Singapore assessments were also steady, with the 150 neutral holding at $805/t-$835/t, and the 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 steady at $820/t-$840/t. Bright stock was hovering at $850/t-$870/t FOB Asia.

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

In the Group III segment, 4 and 6 centiStoke grades were unchanged at $870-$890/t and $850/t-$870/t, respectively, while 8 cSt was stable at $760/t-$780/t, FOB Asia, but remained under downward pressure.

Gabriela Wheeler can be reached directly at

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

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