Asia Base Oil Price Report


Base oil prices in Asia continued on an upward trek, propelled by firm feedstock costs and prospects of a fairly tight supply and demand balance in coming weeks.

While crude numbers had lost ground in early February, they have regained some of the forfeited territory. However, futures fell sharply on Thursday, extending early-week losses after data showed a weekly rise in U.S. crude stocks and production against low refinery utilization rates during the ongoing maintenance period. This sparked concerns that increased U.S. oil production may cause the global market to shift from a roughly balanced market to an oversupplied scenario.

The International Energy Agency expects the United States to surpass Russia by 2019 as the worlds biggest crude oil producer, with the shale oil boom continuing to boost output, analysts noted.

Brent futures were trading at $63.72 per barrel on Thursday, March 1, on the London-based ICE Futures Europe exchange, compared to $66.22 per barrel on Feb. 22.

Asian suppliers have been attempting to recoup margins, which have narrowed on the back of climbing crude oil and feedstock prices over the last three months. Most suppliers have therefore implemented price increases in recent weeks, both at the domestic level and for export transactions.

At the same time, market participants predicted a tightening supply situation on the back of a number of turnarounds starting in March, including SK Lubricants in Ulsan, South Korea, S-Oils in Onsan, South Korea, and Petronas in Melaka, Malaysia.

In Taiwan, Formosa Petrochemical Corp. was heard to have increased its list prices for domestic transactions concluded during the month of March. This price hike comes on the heels of a similar bump implemented in February.

Formosa was understood to have lifted its March API Group II 70 neutral domestic list prices by New Taiwan Dollars (NT$) 0.51 per liter over February levels.

The producers Group II 150N cut moved up by NT$0.71/l, while its Group II 500N price inched up by NT$0.34/l, all effective March 1.

It was also heard that Japanese producers have increased first quarter prices according to a well-established formula based on CIF crude oil values traditionally used to calculate base oil prices. Refiner JX Energy typically leads these price adjustments.

While fourth quarter 2017 prices had fallen by Japanese Yen 5.6 per liter, the price of Group I base oils have been increased for the first quarter 2018 by Yen 3.7/l, according to the set formula, sources said.

There were expectations that the second quarter price would be raised, too, according to the formula, but no exact number was available yet.

Sources in Japan also mentioned that a large U.S. producer with production facilities in Singapore would be lifting Group II base oil prices by U.S. $20 per metric ton, effective March 10.

Japanese lubricant producers mentioned that demand for finished products had slipped in the first couple of months of the year, but expectations were that requirements would pick up with the arrival of spring.

The Japanese government – through its Ministry of Economy, Trade and Industry – continues to encourage the rationalization of the oil industry and further refinery closures may be on the horizon, sources noted. A number of these refineries house base oil plants, which means local production would be curtailed, increasing Japanese blenders reliance on overseas base oil supplies, according to sources.

In China, the government is also implementing restrictions on refineries and other industrial complexes in order to reduce pollution.

Some of the sectors affected by the new regulations are the mining, steel and iron industries, with some plants expected to be shut down, or run at lower production rates in coming years, resulting in reduced demand for lubricants from these segments.

Lubricant consumption from the auto industry should continue at a steady pace, analysts said, although the growth rates have slowed down compared to previous years.

Also in China, Chinas National Development and Reform Commission announced a reduction in the retail price of domestic fuel as of March 1. The retail prices of gasoline and diesel dropped by Chinese Yuan (CNY) 190 per ton (approximately U.S. dollars $30/t) and CNY 185/t (or $29/t), respectively, to reflect falling international crude prices, local media outlets reported. This is the second such move by the NDRC in less than a month, as the previous price reduction was implemented on February 10.

This week, Chinese participants were preparing for the Lantern Festival, which falls on March 2 this year.

In terms of base oil spot price movements in Asia, most indications have been adjusted up to reflect current discussion levels.

On an ex-tank Singapore basis, Group I SN150 and SN500 were revised up by $10/t at $740/t-$760/t, and $850/t-$870/t, respectively. Bright stock was also up by $10/t at $930/t-$950/t, all ex-tank Singapore.

Group II 150 neutral was assessed higher by $10/t as well at $760/t-$780/t, and 500N was also up by $10/t at $910/t-$930/t ex-tank Singapore.

On an FOB Asia basis, Group I SN150 inched up by $10/t at $680/t-$700/t, and the SN500 grade was steady at $780/t-$800/t, FOB Asia. Bright stock was unchanged at $830/t-$860/t.

Group II 150N was assessed up by $10/t at $700/t-$720/t, and the 500N/600N was also adjusted up by $10/t at the lower end of the range to $800/t-$830/t, all FOB Asia.

In the Group III segment, the 4 centiStoke and 6 cSt grades moved up by $10/t to $810/t-$830/t, while the 8 cSt was also up by $10/t at $790/t-$810/t, FOB Asia.

Gabriela Wheeler can be reached directly at

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

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