Asia Base Oil Price Report


Base oil spot prices in Asia continued to be weighed down by oversupply and sluggish demand. This was juxtaposed by climbing crude oil values, which could exert upward pressure on base oil prices.

Market players were keeping an eye on crude futures as prices have strengthened over the last couple of weeks on expectations of output cuts by OPEC and other oil-producing countries.

However, futures fell about one percent on Thursday as no clear signs of a resolution emerged from United States-China trade talks, and official data again highlighted growing fuel stocks in the U.S., according to a Reuters report.

On Jan. 10, Brent March futures were trading at $60.97/bbl on the London-based ICE Futures Europe exchange, up from $54.54/bbl on Jan. 3.

Despite the steeper crude and feedstock prices compared to December, sources pointed out that the base stock market was still mostly driven by supply and demand factors, and that the situation was not likely to change very rapidly.

In fact, the oversupply may be exacerbated later in the quarter when two plants in China start commercializing base oils, and ExxonMobil brings its expansion on stream in Singapore.

Additionally, a majority of regional producers were heard to be running base oil plants at close to full rates as margins for most base stocks were stronger than for transportation fuels, including gasoil.

A supplier that had previously trimmed operating rates was Taiwanese producer Formosa Petrochemical. Formosa had cut operating rates back in October on account of the long supply and squeezed base oil margins, but its API Group II plant in Mailiao was heard to be running at close to full rates.

As a result, Formosa was able to offer spot parcels for January shipment into China, aside from its regular cargoes to cover contractual obligations.

It was also heard that Formosa had lowered the domestic list price of base oils for January.

The price for the producer’s 70 neutral grade was understood to have been marked down by New Taiwan Dollars (NT$) 2.45 per liter, while its 150N grade was reduced by NT$2.99/liter. Formosa’s 500N grade was slashed by NT$3/liter.

Domestic prices were also adjusted in Japan, but contrary to the current downward trend in most of the region, values went up based on the formula used to calculate prices by the main Japanese base oil producer, JXTG Nippon Oil and Energy Corp., which takes into consideration the price of crude oil imports during the previous quarter, among other indices.

JXTG increased its base oil price indication by Yen 3.8 per liter for the first quarter of 2019. South Korean producers who supply base stocks to Japan also marked up their prices by around Yen 3 per liter, according to sources.

While long supply levels were not expected to diminish soon in Asia, upcoming plant turnarounds could help the market regain a more balanced position. At least one South Korean producer was heard to have scheduled a maintenance shutdown in the first half of the year, but further details were unavailable.

Other factors that may have an impact on Asian base oil markets this year are a predicted slowdown in global economic growth and particularly a reduced GDP in China.

The World Bank predicted that the global economic growth rate would hover at around 2.9 percent in 2019, while growth in China is expected to slow to 6.2 percent this year as domestic and external rebalancing continue, a World Bank report suggested.

However, market analysts maintained that China’s current economic growth is likely below the six percent level due to weakening domestic demand.

Observers also said that the results of the U.S. and China negotiations to end the trade dispute that has been ongoing since early 2018 would likely affect prospects for industrial segments such as the automotive sector this year.

As far as base oils were concerned, Chinese participants hoped that requirements would pick up ahead of the Lunar New Year holiday in early February, especially if there were any signs of a possible reversal in the current downward price trend.

Spot base oil prices in Asia this week were assessed as stable-to-soft, as some grades succumbed to downward pressure on account of plentiful availability and lackluster demand.

Ex-tank Singapore prices for Group I solvent neutral 150 were unchanged at $750-$770/t per metric ton, while SN500 was assessed at $770/t-$800/t. Bright stock was steady at $880/t-$900/t, all ex-tank Singapore.

Group II 150 neutral was heard at $780/t-$810/t and 500N was holding at $790/t-$810/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was notionally assessed down by $20/t at $670/t-$690/t, while SN500 was holding at $680/t-$700/t. Bright stock was lower by $10/t at $800/t-$820/t, FOB Asia.

Group II 150N was near $660/t-$680/t FOB Asia, while the 500N and 600N cuts were gauged at $700/t-$720/t, FOB Asia.

In the Group III segment, the 4 centiStoke grade was down by $10/t at $840-$860/t and 6 cSt was at $860/t-$880/t. The 8 cSt grade was unchanged at $710/t-$740/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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