Asia Base Oil Price Report


Asian buyers and sellers tried to assess conditions and finalize plans for the next few months but were waiting for clearer price direction, which kept trading on the quiet side. Scarce spot availability across all regions also dampened the conclusion of business.

The interstice between the year-end holidays and the arrival of the Lunar New Year, which is celebrated in many countries of the region with a two-week long holiday, is typically filled with activity as buyers often start to replenish inventories after they have been depleted ahead of Dec. 31. In 2021, the Lunar New Year festival period starts on Feb. 11 and ends Feb. 26.

This January, it appears that stocks are particularly low as spot availability has been rather thin, and prices have climbed steadily over the last couple of months, which prompted end-users to purchase small cargoes to avoid the risk of prices dropping later. However, sources said that this was unlikely, given that supply was expected to remain tight over the next few weeks.

As long as refiners continued to run at trimmed rates – prompted by reduced demand for fuels and other refined products – and crude oil numbers stayed at current levels, spot base oil volumes were expected to be limited and prices to remain firm.

However, there was guarded optimism that the rollout of COVID-19 vaccines and eventual control of the pandemic may lead to increased activity in the automotive and airline segments, in turn prompting an increase in fuel and lubricant consumption.

Manufacturing activity has also improved in the region, despite coronavirus flare-ups, with China showing a strong recovery and other countries adjusting their expected growth rates. Japan’s government, for example, revised its economic forecast for the next fiscal year, which starts in April, with its gross domestic product expected to be around 4.0%, up from its original 3.4% projection. The upward revision comes after the government issued additional measures to lessen the impact of the coronavirus pandemic, reported.

Meanwhile, the transportation segment continued to report strong fundamentals as well, given heightened interest to move goods from Asia to Europe and the Americas. A dearth of shipping containers in Asia was also placing upward pressure on freight costs and causing shipment delays. Online purchases have been steadily on the rise as well. As a result, demand for packaging materials has increased sharply, leading to steeper pricing, which base oil and lubricant suppliers were hoping to be able to pass down to their own product lines.

Scheduled maintenance at a number of base oil facilities in the first quarter of 2021 was also likely to ensue in a further tightening of supplies.

The turnaround in March at a South Korean API Group II facility triggered speculation that the producer would be limiting its spot offers in order to build inventories to cover term commitments during the outage. There was talk that the producer might be receiving supplemental cargoes from its business partner in the United States, but this could not be confirmed.

Spot availability was also snug in the U.S. and it was not clear whether producers would be able to fill production gaps in Asia, although a large refiner was heard to continue shipping intra-company API Group I and II cargoes to Singapore as one of its base oil plants there remained off line.

U.S. suppliers have also shipped a number of parcels to India, where demand remained healthy throughout the second half of 2020. However, production setbacks in the U.S. caused by hurricanes in late August and continuing output reductions resulted in a tight supply and demand scenario, curbing the amount of product available for spot export business.

Nevertheless, at least 20,000 metric tons of Group II base oils were understood to have been booked to move from the U.S. for delivery at Indian ports in late January. Additional discussions for similar arrangements were heard to be underway. Sources hoped that an influx of U.S. origin cargoes into India from January onward would help stabilize the market.

A couple of turnarounds in Japan during the last quarter of 2020 had brought about a tightening of spot availability of Group I cuts. Consequently, buying interest for base oils from Southeast Asian producers had blossomed. With the return to production of the Japanese facilities, additional Group I product was expected to become available, although most of the spot availability was expected to be absorbed by Southeast Asia buyers.

Meanwhile, in Japan, domestic prices for the first quarter of 2021 have increased from the four quarter of 2020. Prices are calculated based on a “cocktail” of different values, and CFR crude oil prices is one of the elements that is included in the calculations. JX Eneos, the major producer who issues the price estimations, increased the Q1 2021 price of 150N by Japanese ¥13.8 (U.S. 13 cents) per liter, to ¥69.96/liter. South Korean suppliers selling to Japan typically follow Eneos’ movements.

Spot prices were assessed stable to firm, but there was a lack of reported transactions as business was muted.

Ex-tank Singapore prices were steady to slightly up on higher buy and sell indications. The Group I solvent neutral 150 grade was up by $5 per metric ton at $730/t-$770/t. The SN500 moved up by $10/t to $900/t-$940/t and bright stock was unchanged at $980/t-$1,020/t, all ex-tank Singapore this week.

The Group II 150 neutral was assessed at $780/t-$820/t, and the 500N was adjusted up by $10/t to $920/t-$950/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed up by $10/t at the low end of the range to $650/t-$680/t, and the SN500 was steady at $810/t-$850/t. Bright stock was higher by $10/t at $910/t-950/t, FOB Asia.

Group II 150N was holding at $670/t-$710/t FOB Asia, while the 500N and 600N cuts were also steady at $780/t-$820/t, FOB Asia.

In the Group III segment, the 4 centiStoke was mentioned at $860-$900/t and the 6 cSt was hovering at $880/t-$920/t. The 8 cSt grade was unchanged at $800-$840/t, FOB Asia for fully approved product.

Upstream, crude oil futures jumped on Wednesday, following a surprise announcement by Saudi Arabia at the OPEC+ meeting on Tuesday that the country would be voluntarily cutting output by a million barrels per day. OPEC+ had previously agreed to allow a 75,000 bbl/d production increase, mainly from Russia and Kazakhstan, in February and March.

On Thursday, January 7, Brent March futures were trading at $54.42 per barrel, from $51.45/bbl for February futures on Dec. 30 on the London-based ICE Futures Europe exchange.

Dubai front month crude oil (Platts) financial futures settled at $53.58/bbl on the CME on Jan. 6, from $50.48/bbl on Dec. 29. (CME note: Settlement prices on instruments without open interest or volume are provided for web users only and are not based on market activity.)

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.

Related Topics

Base Oil Pricing Report    Base Stocks    Market Topics    Other