Asia Base Oil Price Report


Escalating crude oil and feedstock values exerted upward pressure on base oil prices in the Asian market, while ample availability of most grades was acting as a damper to potential price movements.

Base oil spot negotiations were ongoing, but reaching an agreement regarding prices appeared to be a difficult proposition, given that producers seemed determined to raise numbers to recover part of the lost margins, and buyer resistance continued to be strong.

Crude oil futures moved near four-year highs this week, and climbed on Thursday after U.S. officials dismissed the notion of selling domestic reserves to undercut a rally in crude.

Expectations that global supply would be reduced by the renewal of sanctions on Iran also supported the higher levels.

It was not clear how the sanctions would affect base oil exports from Iran. The country typically exports Group I barrels to Asia, with large volumes moving regularly to India.

Experts were of the opinion that Iranian producers would find alternative ways of exporting both crude and base oils, perhaps by shipping to a specific port and then re-exporting material, or using intermediaries to handle the transactions.

On Thursday afternoon, Brent October November futures were trading at $81.55 per barrel on the London-based ICE Futures Europe exchange, compared to $78.69/bbl on Sep. 20.

In countries such as Japan, where base oil values are largely determined via a formula based on a cocktail of prices, including CIF crude values, base stocks reflected the recent upward movement of oil prices.

Consequently, the benchmark price for Group I base oils in the third quarter (July to September) offered by JXTG Nippon Oil and Energy increased by Japanese Yen 1.04 per liter from Q2 to Yen 90.6/l. The producer just announced that its Q4 pricewould be increasing by Yen 12/l to Yen 102.6/l, reflecting the surge in CIF crude import costs, sources noted.

Meanwhile, in the United States, a couple of large paraffinic base oil refiners were also heard to be seeking posted price hikes on the back of climbing raw material costs. Both producers were hoping to raise prices by 20 cents per gallon in early October, although producer confirmation was not forthcoming.

One of the refiners, which also operates facilities in Singapore, has not indicated any adjustments on its ex-tank Singapore prices at this point, according to market participants.

If the hikes for the U.S. market go through, it might become even more difficult to make numbers work for export transactions of U.S. product to Asia. Movements of base oils from the U.S. have declined compared to earlier in the year because of lower prices in Asia, but Asian producers continue to ship product to the U.S., with Group III grades in particular getting the lions share as there is still comparatively little production of these cuts in North America.

Meanwhile, part of Asian base oil supply was being restored with the return to production of a couple of base oil facilities.

Taiwanese producer Formosa Petrochemical was heard to have restarted its API Group II plant in Mailiao, which can produce 600,000 metric tons per year of base oils, following an extended turnaround which had begun in July. The producer has trimmed shipments to China as its inventories have been depleted, but stocks were expected to be rebuilt in coming weeks.

There were also reports that the base oil unit of Chinese producer Sinopec Jingmen has been restarted, after completion of a maintenance shutdown which started in late August. The plant has capacity to produce 203,000 t/y of Group I and 100,000 t/y of Group II base oils.

Base oil spot indications in Asia were largely unchanged, with most offers cited close to the high end of the portrayed ranges and in some cases, moving slightly above, and bids hovering at U.S. dollars $10-$20 per metric ton below offer levels.

Ex-tank Singapore numbers for Group I solvent neutral 150 were heard at $760/t-$780/t, and the SN500 and SN600 cuts at $860/t-$880/t. Bright stock was steady at $925/t-$945/t, all ex-tank Singapore.

Group II ex-tank Singapore assessments were largely unchanged, with 150 neutral cited 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 being discussed near $820/t-$840/t. Bright stock was steady at $850/t-$870/t FOB Asia.

Group II 150N was holding at $750/t-$770/t FOB Asia, while 500N and 600N were heard at $810/t-$830/t FOB Asia.

In the Group III segment, 4 and 6 centiStoke grades were mentioned at $870-$890/t and $850/t-$870/t, respectively, while 8 cSt was trading 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