Asia Base Oil Price Report


Activity in Asia remained unseasonably lively, and pricing was firm, despite the fact that buying appetite tends to languish during the last month of the year and producers typically lower values to capture business and to clear inventories for tax purposes.

This year, stocks have already been kept rather low throughout as refiners had reduced run rates at the start of the pandemic, and many continued to throttle back base oil production due to weak margins and a supply glut on the distillates side. However, there were signs that base oil production rates have been increased at several facilities given the tight supply and demand ratio.

Spot prices have therefore been buoyed by a combination of limited availability and prospects of potential shortages of certain grades. API Group I bright stock, for instance, has been particularly difficult to locate and other regions reported similarly strained supply.

United States Group I producers have been striving to meet domestic and export demand, but a majority of spot cargoes were moving to Mexico and Brazil, with no extra availability to entertain business with Asian buyers, regardless of whether prices would work.

A U.S. producer has also been shipping Group I and II material to support its operations in Singapore, as one of its Group I plants there remains off-line and this has tightened supply further. While a restart date for the plant has not been communicated, there were expectations that it would be restarted in 2021, although no producer confirmation was forthcoming as the company does not comment on its operations.

European supplies of bright stock have similarly been limited as requirements in that region have drained most of the available product.

A couple of turnarounds at regional Group I plants, including a two-month shutdown at a Japanese refinery and another maintenance program in India have exacerbated the Group I tightness.

A bountiful source of Group I material appeared to be Southeast Asia, with two Thai producers catering to a growing number of customers in search of the elusive Group I cargoes.

Group II spot cargoes have also been rather scarce, although U.S. supply should improve with the restart of a plant that was affected by a hurricane on the U.S. Gulf Coast, and a couple of plants increasing production rates in recent weeks. It was heard that a number of cargoes were booked to move to India this month.

Additionally, blenders continued to utilize Group II grades to replace the hard-to-find Group I cuts in those applications that allowed substitution, as the price gap between these categories has narrowed or disappeared, especially for the heavy-viscosities, which were in high demand.

Participants expected a resurgence of coronavirus infections to dampen fuel and lubricant demand, but so far, the impact of the second wave of the pandemic has not been very evident in Asia, likely because only a few countries have reimposed generalized lockdowns. However, the situation may change with the start of the coldest part of the winter season.

Furthermore, international travel has also remained depressed, resulting in shrinking demand for jet fuel and aviation fluids, and this has impacted some refinery operations.

“Following the sharp drop in fuel demand, refining margins dropped below zero for the first time since 2013. The recovery has been uneven. Demand for gasoline has risen as more cars have returned to the road and as shops, retail stores, and restaurants have reopened. However, demand for jet fuel has remained anemic, with US demand still half of its pre–COVID-19 levels, as many people defer air travel,” a Deloitte Insights report said.

On the other hand, there were hopes that the recently signed Asia-Pacific trade agreement would boost the economies of its members. Fifteen countries, including China, Japan, South Korea, Australia, New Zealand, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, signed the Regional Comprehensive Economic Partnership agreement on Nov. 16, creating the world’s largest trading bloc, which promises to help speed up the members’ post-pandemic growth, Nikkei Asia reported.

Base oil demand was particularly robust in India, with lubricant segments remaining energetic due to a pickup in automotive sales, heightened mobility of the population following the monsoon season and during national festivals, and healthy agricultural and manufacturing activities.

China, on the other hand, has shown strong demand for domestic base oils, but lackluster buying appetite for imports, despite scarce local Group I supplies.

Even Taiwanese Group II spot cargoes, which usually find their way to China, have been diverted to other destinations such as India. The Taiwanese producer was anticipated to reduce operating rates this month to perform some minor maintenance, but details could not be confirmed.

Chinese buyers appeared anxious to catch up on purchases and have upped their bids in order to secure cargoes, particularly of the heavy grades, as they had so far been outbid by buyers in Southeast Asia and India. Several South Korean parcels were also expected to move to China in December.

Spot base oil prices in Asia have been adjusted up given the strong buying interest in the region, scant supply, and the higher bids and offers for December shipments. Climbing crude oil values exerted upward pressure to a certain extent. Numbers also reflected the recent adjustments of published prices widely regarded as benchmarks for the region.

Ex-tank Singapore prices were adjusted up this week on higher price indications. The Group I solvent neutral 150 grade was assessed up by $15/t at $625/t-$665/t. The SN500 inched up by $20/t to $770/t-$810/t and bright stock was also up by $20/t at $850/t-$890/t, all ex-tank Singapore this week.

The Group II 150 neutral was adjusted up by $20/t to $650/t-$690/t, and the 500N also edged up by $20/t to $790/t-$820/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed up by $20/t at $550/t-$590/t, and the SN500 was revised up by $20/t to $700/t-$740/t. Bright stock was higher by $30/t at $790/t-830/t, FOB Asia.

Group II 150N was adjusted up by $10/t to $580/t-$620/t FOB Asia, while the 500N and 600N cuts also edged up by $10/t to $690/t-$730/t, FOB Asia.

In the Group III segment, the 4 centiStoke was revised up by $10/t to $790-$830/t and the 6 cSt was steady at $800/t-$840/t. The 8 cSt grade was assessed higher by $10/t at $740-780/t, FOB Asia for fully approved product.

Crude oil values moved up over the last two weeks, boosted by news of the imminent start of COVID-19 vaccination campaigns and expectations that the OPEC+ would decide to extend their production curbs for another three months during a meeting this week. However, on Thursday, there was still no decision regarding the production cuts, with investors and analysts awaiting action.

On Thursday, Dec. 3, Brent February futures were trading at $48.48 per barrel, from $48.49/bbl for January futures on Nov. 25 on the London-based ICE Futures Europe exchange.

Dubai front month crude oil (Platts) financial futures settled at $47.46/bbl on the CME on Dec. 2, from $47.14/bbl on Nov. 24.

Gabriela Wheeler can be reached directly at 

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.

Related Topics

Base Oil Pricing Report    Base Stocks    Market Topics    Other