Asia Base Oil Price Report


Spot numbers in Asia continued to be exposed to downward pressure on account of the current supply-demand conditions, together with feedstock price volatility.

There is plentiful supply of most base oil grades within the region, and the influx of imports added to the pressure of growing inventories.

At the same time, demand has failed to pick up significantly, disappointing a few suppliers who hoped to see strong off-take ahead of the Lunar New Year festivities starting on Feb. 5. However, since many manufacturers close their doors or reduce production rates for a few days, it was not completely surprising to see buying appetite weaken as the holiday drew near.

Some sellers were holding on to hopes that buyers would return en masse to the market following the holiday, as stocks were likely to be low by then.

In China, consumers were heard to have adequate stocks to run day-to-day operations and were cautious about acquiring large quantities of base oils on concerns that prices may stay on a downward trek.

However, producers were of the opinion that prices were close to the bottom as margins were thin and there was little room for values to move lower.

There continue to be reports of regular cargoes moving from the Middle East to China, with API Group II and III cuts being offered at competitive levels.

This has led to replacement of Group I cuts in applications that allow it, even in cases where there is no technical need to use the higher performance oils.

Market participants also said that this is a trend that keeps growing as many end-users have changed formulations to be able to use Group II base stocks as Group I production has been rationalized and will likely be phased out in coming years.

Furthermore, in India, there has been a reduction of Group I imports from Iran due to the implementation of United States sanctions on Iranian crude oil exports. Although a ban on base oil exports has not been as explicit, it appeared that the sanctions have had an impact on general export transactions and there have been fewer cargoes moving out of Iran into destinations such as India.

Additionally, it was heard that there have been several cargoes of European and U.S. base oils moving to India, filling the gaps left by local suppliers, as Indian production is not enough to cover requirements, even when domestic producers are running plants at full rates.

U.S. suppliers have been looking for opportunities to place material in Asia as the domestic market was lengthening and values have also been under pressure. However, the situation was not very encouraging in most Asian markets, as many segments appeared saturated with product, with the exception of Japan perhaps, a source noted.

Asian participants also mentioned geopolitical tensions and predictions of a slowdown in global economic growth rates as having a negative effect on market sentiment.

In particular, there has been some concern about the health of the automotive industry in markets such as China, which had been reflecting steady growth through most of 2018, but already showed weaker performance in the last two quarters of the year.

A look at what has been going on in the crude oil front was not very reassuring either. Crude oil futures dipped on Thursday on reports of a build-up in U.S. crude stocks, but the possibility of decreased Venezuelan production due to sociopolitical unrest stalled the decline and prices moved up in afternoon trading.

Venezuelas political turmoil may result in a near-term shortage of crude for some U.S. refiners, but in the long run, it could lead to higher output for the South American country, which has seen production suffer under the regime of President Nicolas Maduro, reported.

On Jan. 24, Brent March futures were trading at $61.13/bbl on the London-based ICE Futures Europe exchange, up from $60.43/bbl on Jan. 17.

In terms of base oil spot prices, there has been some softening this week, although several grades managed to remain stable, particularly those that had been adjusted down in recent weeks.

Suppliers were resisting lower buying ideas, but those that were eager to place material agreed to small discounts, although most sellers reported generally muted buying interest and a dearth of concluded business.

Ex-tank Singapore prices for Group I solvent neutral 150 were down by $10/t at $740-$760/t per metric ton, while SN500 was unchanged this week at $750/t-$790/t. Bright stock was also slightly down by $10/t at $870/t-$890/t, all ex-tank Singapore.

Group II 150 neutral was holding at $750/t-$800/t and 500N was also steady at $760/t-$810/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed at $650/t-$690/t, while SN500 edged down by $10/t to $620/t-$640/t. Bright stock was holding at $780/t-$800/t, FOB Asia.

Group II 150N moved down by $10/t to $590/t-$610/t FOB Asia, while the 500N and 600N cuts were also assessed down by $10/t to $630/t-$650/t, FOB Asia.

In the Group III segment, the 4 centiStoke grade was holding at $820-$860/t and the 6 cSt at $830/t-$880/t. The 8 cSt grade was also 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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