Asia Base Oil Price Report


The base oil market in Asia slowly regained its regular pace, following several days of muffled activity due to the Lunar New Year holidays, when many participants were away from their workplace.

While this situation was particularly evident in China, Taiwan and Vietnam, other countries where a large part of the population celebrates the Lunar New Year were also impacted by the festivities.

Base oil suppliers had generally expressed their disappointment ahead of the start of the holidays as trading had not been as strong as they had hoped, and attributed this partly to the fact that supply was ample and consumers were not concerned about being able to secure product upon their return to business.

That said, a couple of sellers reported a pick-up in orders for February shipment to various countries in Asia. We were surprised at how many inquiries we received, a supplier noted, citing depleted inventories after the December holidays as a probable cause for the sudden buying interest.

Sellers admitted that there were too many trading companies vying for business in the key market China, and they all offered competitive prices to end-users in order to secure market share. It was good to see activity start to improve, but we are not willing sell at the low prices importers were suggesting, a source commented.

Market players active in China mentioned concerns that supply would outpace demand due to an expected slowdown in the countrys economic growth rate versus an increase in base oil production due to the start-up of new projects.

However, a source familiar with Chinas base oil market noted that these concerns have cropped up in the past, and that the Chinese demand for base oil always seems to be insatiable, no matter what.

Several new base oil units are coming on stream in China this year, including Hengli Petrochemicals and Hainan Handi Sunshine Petrochemicals API Group II/III units, which were anticipated to begin streaming on-spec product Hainan Handi Sunshine Petrochemicals in the first quarter.

Hengli Petrochemical Corp. announced late last year the start-up of a refinery on Changxing Island that includes a Group II and III base oil plant. Hengli expects to sell product both in the domestic and export markets. The units nameplate capacity will be 683,000 metric tons per year of Group II and III base oils, according to LubesnGreases Guide to Global Base Oil Refining.

Hainan Handi Sunshine Petrochemical is in the midst of a Group II/III expansion of its base oil plant on Hainan Island, and anticipated the project to be completed early this year. The unit was expected to be able to produce 800,000 t/y of Group II and III base oils.

Later in the year, Qingyuan Group, an independent Chinese refiner, was expected to start up a new unit in Shandong province to manufacture Group III base stocks. The company did not disclose the output capacity but said that, aside from Group III base stocks, it would also produce rubber process oils and white oils. The company said the key piece of the project is a hydrocracker being constructed at its specialty oil refinery in Yishui county, Shandong.

Suppliers also reported healthy buying appetite in India, but mentioned that this market was becoming saturated with product as several cargoes of Group II base oils were scheduled to arrive from the United States Gulf Coast in February. Regional players said that prices in India had softened significantly and one supplier acknowledged withdrawing its offers as prices were too low.

The same source explained that a number of large U.S. Group II producers have a production cost advantage over manufacturers in Asia, even after factoring in transportation expenses, due to their economies of scale and feedstock costs. Another source concurred and characterized the market situation in India as a tug-of-war between U.S., South Korean and, to a lesser extent, Middle East producers.

Spot price assessments in Asia remained largely unchanged this week as buyers and sellers were waiting for more definitive signs of whether requirements would prosper after the Lunar New Year holidays and crude oil prices would continue to move up. The price of crude has gained nearly 20 percent this year, boosted primarily by the prospect of a decline in oil supply from the Organization of the Petroleum Exporting Countries and other top exporters such as Russia, who agreed to trim production.

On Thursday, Brent crude oil futures hit a 2019 high of $64.81 per barrel in early trading as prices received support from optimism that the United States and China could resolve their trade dispute, but prices eased later in the day on reports of the sharpest decline in U.S. retail spending since 2009, which reflected investor fears of a global slowdown.

On Feb. 14, Brent April futures were trading at $64.43 per barrel on the London-based ICE Futures Europe exchange, up from $60.98/bbl on Feb. 7.

In terms of spot base oil prices, ex-tank Singapore assessments for Group I solvent neutral 150 were steady at $740-$760/t per metric ton, while SN500 was unchanged from last week at $750/t-$790/t. Bright stock was holding at $870/t-$890/t, all ex-tank Singapore.

Group II 150 neutral was heard at $750/t-$800/t and 500N 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 was steady at $620/t-$640/t. Bright stock was hovering at $780/t-$800/t, FOB Asia.

Group II 150N was unchanged at $590/t-$610/t FOB Asia, while the 500N and 600N cuts were heard at $620/t-$640/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 steady at $710/t-$740/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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