Asia Base Oil Price Report


While several countries in Asia continued to deal with the effects of the COVID-19 pandemic, demand appeared to have improved in some areas, leading to reports of tightening conditions and more stable pricing.

Furthermore, the possibility of a coronavirus vaccine and announcements earlier this week of new stimulus packages in South Korea, Japan and the United States boosted optimism among Asian petrochemical companies, whose shares went up on Wednesday, following a similar reaction on Wall Street.

One of the countries which had begun to deal with the pandemic earlier than others was China, and it was not surprising to see that this nation appeared to be on a recovery path, with industrial production showing an increase, culminating several months of shutdowns and reduced output.

China appeared to be the first major economy to return to positive territory, posting a 3.2% growth in gross domestic product in the second quarter, according to media reports.

A majority of Chinese base oil plants, which had idled operations, or dialed back run rates at the onset of the pandemic in January, have restarted or returned to normal rates.

While this has led to an increase in domestic availability of base stocks, buying interest for imports had also blossomed in May and June, given the availability of competitively-priced material from Northeast and Southeast Asia and the Middle East.

However, one of the producers who routinely ships API Group II products to China, Taiwanese producer Formosa Petrochemical Corp., has embarked on a forty-day routine turnaround at its plant in Mai-Liao, which was expected to be completed in mid-August. While the producer was anticipated to meet its contractual obligations during the shutdown, there was less spot availability, leading Chinese and also Indian buyers to seek alternative sources of product.

Additionally, Formosa was forced to shut a residue desulphuriser unit at its 540,000 barrels-per-day Mai-Liao refinery after a fire early on Wednesday, Reuters reported. The refinery is one of Asia’s 10 largest standalone refining plants.

The Reuters article added that trade sources had indicated the outage would hit output of low-sulphur residual fuels used either in blending, to make very low sulphur fuel oil for bunkering, or fed into other secondary units for gasoline or gasoil production. Formosa cut VLSFO exports this month as it stepped up production of gasoline and gasoil on improving margins.

In China, base oil imports may see a slowdown as prices were edging up and end-users seemed to have replenished inventories and were comfortable with current availability.

Stocks had been drawn down during March and April, when uncertainties abounded and crude prices had fallen, with base oil prices comparatively hovering at steep levels. When base oil values softened in May and June, buyers had jumped back into the market.

A moderate recovery of the industrial and automotive segments had also resulted in improved demand for base oils and finished lubricants in China in May. Chinese automotive production and car sales both showed an uptick in May-June.

The increase in manufacturing activities in China and other countries in Asia has also led to a tightening in heavy-viscosity base oils and bright stock, with supplies from other regions described as snug as well. The ongoing shutdown at a major Group I plant in Singapore contributed to the tightness.

A good number of parcels of Group II base oils were on their way to Indian ports from the United States and the Middle East as buyers took advantage of arbitrage opportunities in June, while South Korean product was also expected to be arriving in India over the next few weeks.

Whether India will continue to absorb base oil barrels from other regions was not clear, as immediate needs appeared to have been met and prices have generally risen from most sources.

India has also seen a surge in new coronavirus cases, and a reversal of the easing of lockdown measures, coupled with the monsoon season, could bring devastating effects to base oil and lubricant consumption. A spike in new virus cases has prompted the re-introduction of strict measures until the end of July in over ten states in India, which could lead to a drop in business activities, the use of transportation and driving.

Spot prices in Asia were assessed as stable, although some segments were showing small upward movements within the prevailing ranges due to tightening conditions, while others, such as the Group III category, remained under pressure given plentiful availability against lukewarm buying interest.

Ex-tank Singapore assessments for the Group I solvent neutral 150 grade were unchanged at $490/t-$530/t this week, while the SN500 was at $530/t-$560/t. Bright stock was hovering at $655/t-$685/t, all ex-tank Singapore.

The Group II 150 neutral was stable at $500/t-$520/t and the 500N was assessed at $600/t-$630/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $420/t-$440/t, and the SN500 at $440/t-$480/t. Bright stock was assessed at $530/t-560/t, FOB Asia.

Group II 150N was steady at $440/t-$470/t FOB Asia, while the 500N and 600N cuts were hovering at $510/t-$550/t, FOB Asia.

In the Group III segment, the 4 centiStoke was steady at $680-$720/t and the 6cSt at $690/t-$730/t. The 8 cSt grade was heard at $670-690/t, FOB Asia for fully approved product.

Upstream, crude oil futures slipped on Thursday, on weaker demand prospects, signs of a slowing recovery in the labor market in the U.S., and a decision by OPEC+ to ease production curbs. Oil futures had hit a four-month high on Wednesday, but U.S. crude fell by 1.1% on Thursday.

OPEC had been concerned about a second coronavirus wave that would lead to a reduction in global oil demand as countries would reinstate lockdown measures. This scenario was evaluated during a virtual meeting of the OPEC+ on July 15, but Saudi Arabia apparently favored relaxing the record 9.7-million barrels per day cuts as of August 1.

On Thursday, July 16, Brent September futures were trading at $43.28 per barrel on the London-based ICE Futures Europe exchange, up from $42.34/bbl on July 9.

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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