Asia Base Oil Price Report


Conflicting currents continue to impact business in the Asian market, with hefty crude oil and feedstock values exerting upward pressure and ample supply thwarting base oil price adjustments.

Producers reiterated that margins have been squeezed by the recent climb in raw material values and transportation costs, but that it was difficult to pass those increases down the supply chain because buyers were resisting any attempts at implementing increases.

Furthermore, lukewarm market conditions in downstream lubricant segments meant that buying appetite for base oils has declined. Last week, activity in key markets like China was particularly subdued due to the celebration of the National Day or Golden Week holiday.

Buyers appeared to be comfortable with current base stock inventories and did not seem anxious to source additional product because of the general perception that there was ample supply.

With regional plants resuming production, most facilities running at close to full rates, and plenty of availability from other regions – often offered at very competitive prices – there were no product shortages noted.

Additional capacity from plant expansions in Asia and the future completion of new base oil plants in China were expected to exacerbate current conditions and result in an oversupplied market in coming years.

In Taiwan, Formosa Petrochemical brought its API Group II plant back up in late September, following a turnaround that had started in July. The plant in Mailiao can produce 600,000 metric tons per year of base oils, according to Lubes’n’Greases Global Guide to Base Oil Refining.

While Formosa had suspended spot shipments and had also cut the volumes shipped under contract during the turnaround, supply was expected to be gradually returning to normal levels, while the supplier was also heard to be rebuilding inventories.

In South Korea,Hyundai Oilbank/Shells expanded base oil plant in Daesan, South Korea, came back on stream at the end of September. The unit was taken off-line in mid-August, and an additional 250,000 t/y Group II base oils were anticipated to become available over the next few weeks, lifting the plant’s capacity to 1,000,000 t/y.

Sources said that base oil supply may be reduced in coming weeks if producers decide to trim base oil production, although the process cannot be completed overnight.

Since crude oil prices were hovering near four-year highs, it may make more sense to either sell feedstocks before they are further processed, or use raw materials for the production of transportation fuels, which offered better margins, sources said. “When base oil prices touch on, or even go below, diesel prices, it puts refinery management in a terrible quandary: Keep making base oil at a loss, or switch over to diesel,” a source noted.

Crude oil futures have been hovering near four-year highs, but fell on Thursday on reports of a significant build in United States crude inventories, compared to analysts’ expectations that this week would see much lower inventory levels.

Oil prices had risen earlier in the week as Hurricane Michael, which hit the U.S. Gulf Coast on Tuesday, forced more than 40 percent of oil production capacity in the Gulf of Mexico to shut down. However, this production would be brought back online fairly quickly, analysts said.

On Thursday, Oct. 11, Brent November futures were trading at $81.12 per barrel on the London-based ICE Futures Europe exchange, compared to $85.89/bbl on Oct. 4.

In related news, Asian petrochemical shares finished sharply lower on Thursday, following a slump in the Asian stock market and a heavy sell-off in U.S. equities, which were fueled by concerns over a potential slowdown in global growth and the ongoing U.S.-China trade war.

Export base oil spot assessments were largely unchanged despite the current upward pressure from steep crude and raw material prices.

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

Group II 150 neutral was assessed 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 stable at $700/t-$720/t, while SN500 was holding near $820/t-$840/t. Bright stock was also unchanged at $850/t-$870/t FOB Asia.

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

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