Asia Base Oil Price Report


The second half of the year is just around the corner, and Asian base oil suppliers are bracing for a bumpy ride, as crude oil values remain unpredictable, demand is expected to soften and oversupply conditions continue to weigh on prices.

Industry participants meeting at the 13th ICIS Base Oils and Lubricants Conference in Singapore this week agreed that there were a lot of uncertainties plaguing the system, with the theme of this years event Countdown to 2020: Mitigating volatility and increasing efficiencies across the region viewed as a good reflection of the factors playing major roles in the market at the moment.

Crude oil prices have fluctuated quite significantly since the beginning of the year, with Brent registering levels around $54 per barrel in early January, climbing to $70/bbl in early May and falling to around $60/bbl in early June.

While some of these fluctuations manifested themselves in base oil price revisions throughout the first two quarters of the year, producers said that margins remained thin and prospects were fairly bearish as the market entered the third quarter.

Oil futures dipped in early trading on Thursday, erasing some of the previous sessions gains, ahead of the G20 summit in Japan, and a meeting of OPEC and other crude producers, where discussions will center on whether there will be an extension of current output cuts.

On Thursday, June 27, Brent August futures were trading at $66.55 per barrel on the London-based ICE Futures Europe exchange, from $64.38/bbl on June 13.

Base oil demand in key markets such as China has softened due to the ongoing trade dispute with the United States, which has had a negative impact on the Chinese economy in general, and has affected demand for finished lubes in several industrial segments. There were expectations that trade between the two countries would take center stage at the G20 meeting in Osaka, Japan, later this week.

The inception of additional base stock capacity from new plants in China, together with softer demand, meant that fewer cargoes were being imported from sources like South Korea and the Middle East.

Added capacity to the tune of 100,000 metric tons per year also came on stream in May with the ExxonMobil APIGroup II expansion in Singapore. The rate of new base stock capacity being created far exceeds the rate of demand growth in the region. This dampens the outlook for refiners who are already operating on thin margins, Anuj Kumar Singh, project manager at Kline and Co., explained at one of the ICIS conference presentations.

On the other hand, prospects in India were fairly positive. India is one of the fastest growing economies in the world, and base oil demand remained fairly robust there, as requirements for the manufacture of lubricants for the automotive and motorcycle industries continues to mount, experts noted.

The economic conditions in Japan were also better than many experts described, market sources commented. While demand for base oils during the spring season was slightly weaker than in years past, it was quite steady. Base oil prices were expected to be higher in the third quarter, based on a formula that the major Japanese base oil producer uses to calculate them, which takes into account a cocktail of benchmarks, including the CFR price of crude oil.

One characteristic that most Asian lubricant producers seem to have in common is their drive to use higher performance base oils for the manufacture of automotive lubricants, given the stricter fuel efficiencies and emission controls being imposed in a majority of countries. Asia-Pacific has become a big consumer of Group II oils. The region as a whole is making significant strides toward better quality oils, with Group III demand expected to grow too, Singh noted.

Several presentations also focused on the new marine fuel requirements that the International Maritime Organization will be imposing as of Jan. 1, 2020. The fuels need to comply with the IMOs sulfur content cap of 0.5 percent, down from the current 3.5 percent.

The new requirements will not only place a strain on the shipping sector, but also on refineries that need to start producing more fuel oils that comply with the new specifications, and possibly lead to pressure on fuel oil prices, as well as on sweet crude oil, which is the type of crude used in the production of the low-sulfur bunker fuels. The added expenses were likely to affect the cost of transportation and of finished goods.

The formulation of marine lubricants will naturally be impacted by the new IMO requirements as well, and while Group I will continue to be the preferred base stock, there may be fresh opportunities for Group II cuts, speakers said. Marine fuel and lubricant additives will need to evolve in a more complex world, explained Pui Fun Cheong, marine business advisor of Infineum Singapore Pte. Ltd.

Meanwhile, base oil market activity remained subdued as buyers and sellers preferred to wait until a clearer price trend emerged, with prices showing little fluctuation week-on-week.

Ex-tank Singapore Group I prices for the solvent neutral 150 grade were steady at $740-$760/t per metric ton, while the SN500 was at $790/t-$810/t. Bright stock was unchanged at $900/t-$920/t, all ex-tank Singapore.

Group II 150 neutral was assessed at $780/t-$800/t, while the 500N was heard at $790/t-$820/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was holding at $630/t-$650/t, and the SN500 grade at $620/t-$640/t. Bright stock was steady at $790/t-$810/t, FOB Asia.

Group II 150N was gauged at $620/t-$640/t FOB Asia, while the 500N and 600N cuts were at $640/t-$660/t, FOB Asia.

In the Group III segment, the 4 centiStoke grade was hovering at $820-$860/t and the 6 cSt was at $830/t-$875/t. The 8 cSt grade was holding at $730/t-$760/t, FOB Asia for fully-approved product.

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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