Asia Base Oil Price Report


The Asia base oils market left behind a tumultuous year dominated by the coronavirus pandemic and entered 2021 with participants hoping for healthier industry conditions and a gradual demand recovery as vaccination campaigns are rolled out.

While base oil consumption was fairly robust over the last three months, despite renewed lockdowns and surging infections in many countries, levels were still down from 2019, and it may be some time before those levels are attained once again, sources said. Some experts only expected a full recovery in the second half of 2021, while others said that it may not be until 2022 that the market sees consistent growth.

One of the segments that was impacting refinery operations was the jet kerosene segment, and those refineries that produce the fuel have had to scale back production in order to adjust to the dramatic drop in demand. The airline business was not expected to see vastly improved conditions until passengers felt safe to fly again. This would only be feasible after a large portion of the world’s population is vaccinated, which could take many months, if not years.

Another segment that needs to improve in terms of activity is the automotive sector, as global car sales have fallen year on year, and driving distances have shrunk as those people that were able to work from home have stopped commuting, dampening motor fuel and lubricant consumption.

Global sales of automobiles were forecast to fall to just under 62 million units in 2020, down from a peak of almost 80 million units in 2017, according to China is considered one of the largest automobile markets worldwide, both in terms of sales and production. Car sales in China cratered in February 2020, but the segment was showing signs of recovery. India was witnessing a revival in utility vehicle and tractor sales.

As a result of reduced refinery run rates and improved demand since June 2020, following the lifting of coronavirus-related restrictions, base oil supply was strained in Asia for most of the fourth quarter last year due to reduced feedstock availability, and was expected to display similar conditions during the first few weeks of 2021.

A number of plant turnarounds during the second half of last year, together with unexpected outages, both in Asia and in other regions, such as North America, resulted in a global shortage of certain grades, namely bright stock. A series of turnarounds in the first half of the new year was also expected to strain supply further.

The tight supply and demand balance, together with firm crude oil prices, led to a steady increase in spot indications in Asia since July. Within the API Group I, for instance, the solvent neutral 150 grade was assessed at $420-$440 per metric ton on July 3, compared with $610-$650/t on Dec. 25.

Similarly, the Group II 150 neutral grade climbed from $440-$470/t on July 3 to $640-$680/t on Dec. 25.

Bright stock was the cut that showed the most dramatic climb, with values hovering at $520-$560/t in early July to reach $860-$900/t at the end of December.

The year also ended with Indian buyers showing robust interest in securing spot cargoes from various origins, including Northeast Asia, Southeast Asia, the Middle East, the U.S. and Europe. Around 20,000 metric tons of Group II base oils were heard booked for lifting from the U.S. to India in December for delivery in late January. Additional discussions for similar arrangements were heard to be underway.

Shipments from Southeast Asia to other destinations has been an atypical phenomenon, as producers tend to supply buyers within the same area, but were expected to continue in coming months.

Thai supplies of Group I heavy grades and bright stock have commanded keen attention as availability of these grades was limited.

At the same time, there was improved availability of Japanese Group I grades, as a Japanese producer has completed a turnaround, and these cargoes were likely to move to Southeast Asia.

While Chinese buyers had held back on securing import cargoes for most of the year, they started to be more actively engaged in spot trades in December, particularly in terms of heavy grades, with bids increasing and steeper domestic values also supported by a snug supply scenario.

This week, trading was generally muted due to the New Year’s holidays, but most discussions yielded steeper spot indications. Prices continued on an upward trend as buyers raised their bids in order to secure needed volumes, and suppliers lifted their offers.

A major refiner in Singapore increased its Group I and Group II prices twice in December, with the latest $30 per metric ton increase impacting the ranges portrayed below. Prices also reflected published values widely regarded as benchmarks for the region.

Ex-tank Singapore prices were assessed up once again this week on steeper offers from a large refiner. The Group I solvent neutral 150 grade was higher by $30/t at $725/t-$765/t. The SN500 also moved up by $30/t to $890/t-$930/t and bright stock was up by $30/t as well to $980/t-$1,020/t, all ex-tank Singapore this week.

The Group II 150 neutral jumped by $30/t to $780/t-$820/t, and the 500N was also adjusted up by $30/t to $910/t-$940/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed up by $30/t at $640/t-$680/t, and the SN500 was also up by $30/t at $810/t-$850/t. Bright stock surged by $40/t at $900/t-940/t, FOB Asia.

Group II 150N was assessed up by $30/t at $670/t-$710/t FOB Asia, while the 500N and 600N cuts also moved up by $30/t to $780/t-$820/t, FOB Asia.

In the Group III segment, the 4 centiStoke was revised up by $20/t to $860-$900/t and the 6 cSt was also up by $20/t at $880/t-$920/t. Similarly, the 8 cSt grade moved up by $20/t to $800-840/t, FOB Asia for fully approved product.

Upstream, crude oil futures moved up on Tuesday after reports by the American Petroleum Institute of a higher-than-expected draw in U.S. oil inventories and the rollout of vaccination campaigns in the European Union and North America.

Brent and West Texas Intermediate were up on Tuesday morning before the release of the API report on expectations of a larger round of stimulus checks in the U.S. However, crude oil gains continued to be dampened by OPEC+ plans to gradually increase oil production in the new year despite lockdowns and weaker demand.

On Wednesday, Dec. 30, Brent February futures were trading at $51.45 per barrel, from $49.37/bbl on Dec. 23 on the London-based ICE Futures Europe exchange.

Dubai front month crude oil (Platts) financial futures settled at $50.48/bbl on the CME on Dec. 29, from $49.56/bbl on Dec. 22. (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)

Lubes’n’Greases would like to wish you a Peaceful and Happy New Year!

Gabriela Wheeler can be reached directly at 

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

Historic and current base oil pricing data are available for purchase in Excel format.

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