Asia Base Oil Price Report

Fluctuating crude oil prices and other market uncertainties are keeping Asian players on edge, dampening activity and affecting production rates.

Base oil producers lamented that margins continued to be squeezed as prices have been under pressure for the better part of the year, while production costs have not abated, despite crude oil price drops in recent months.

Crude oil price gains over the last few weeks have partly halted the downward price trend observed in the base oils segment - lending some stability to spot price indications - but other factors such as slowing demand and downcast economic prospects in various Asian countries are still weighing on pricing.

The last few months of the year typically usher in a reduction in requirements, and also trigger lower running rates as both producers and consumers prefer to end the year with lean inventories due to tax implications.

Buyers tend to purchase small cargoes to run daily manufacturing operations in the short term, while producers sometimes trim operating rates or schedule turnarounds at a time when demand is slim.

At the same time, a number of Asian producers were heard to be favoring the production of transportation fuels to the detriment of base oil output given more favorable margins for gasoline and diesel.

While this situation could ensue in reduced availability of base oils and support firmer prices ideas, the slowdown in base oil demand may counterbalance the tightening supply levels, sources noted.

Participants said that API Group I oils appear to be plentiful and therefore, there has been growing downward pressure on these products, with bright stock seeing the most softening.

China imported large volumes of competitively-priced bright stock from Thailand in August and September, for example, resulting in healthy inventories and downward pressure on local price indications.


Group II supply is a bit more balanced, given a fairly recent turnaround at Formosas Group II plant in Taiwan, and a number of shipments from South Korea concluded into Europe in recent weeks.

The Group III segment is where the price pressure appears to be the strongest because there are more limited outlets for these oils against global hikes in production levels.

The 4 centiStoke and 6 cSt oils have edged down since October and the pressure is still on.

The situation is particularly evident in India, where fresh shipments from the newly started Adnoc Group III plant in Ruwais, United Arab Emirates, have been spotted.

The Adnoc facility has capacity to produce 100,000 metric tons per year of Group II oils and 500,000 t/y of Group III products, according to LubesnGreases Global Guide to Base Oil Refining.

Sources had noted when the plant was close to starting up in April that India was likely to be targeted as a big market for the new capacity, and indeed, prices were said to be quite competitive as the producers goal is to gain and retain market share in that country.

There were rumblings that 4 cSt and 6 cSt cargoes were available in India at values near $600 per metric ton FOB and below, although this could not be confirmed. The ample availability of these grades was also said to have resulted in reduced demand for certain Group II light-vis cuts that can be replaced with Group III oils given the attractive pricing.

Group III base oils have not only seen some erosion in India, but in other Asian destinations as well. Northeast Asian cargoes were being offered at competitive levels given plentiful supplies, with 4 cSt and 6 cSt numbers dropping between $20/t to $30/t on an FOB basis week-on-week.

Thin trading and subdued discussions resulted in few price changes in Asia this week, although a couple of cuts were adjusted down on lower bids and offers, and the Group III assessments were revised down as mentioned above.

On an ex-tank Singapore basis, API Group I solvent neutral 150 was unchanged at $585/t-$605/t, while the SN500 was steady at $665/t-$695/t. The bright stock price range was unaltered at $910/t-$930/t.

The Group II 150 neutral was heard at $585/t-$605/t, and 500N was holding at $760/t-$780/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was assessed at $470/t-$490/t, while the SN500 was revised down by $10/t to $560/t-$580/t FOB. Bright stock was unchanged at $770/t-$790/t FOB.

In the Group II category, 150N was down by $10/t at $470/t-$490/t, while 500N/600N was revised down by $5/t-$15/t to $630/t-$650/t, all FOB Asia.

In the Group III segment, the 4 centiStoke and 6 cSt oils were heard down by $20/t-$30/t at $750/t-$780/t, FOB Asia, while the 8 cSt grade was holding at $650/t-$670/t FOB Asia.

Upstream, crude oil prices slipped on a very bearish U.S. Energy Information Administration report about crude inventories in that country, which were said to have increased the most in 34 years of data.

Additionally, there was further talk that oil exports from Iran will be rising, while top exporter Saudi Arabia also increased its shipments to 8.4 million barrels a day and Libya's exports doubled from levels seen in recent months.

Narrowing U.S. presidential election polls hours ahead of Election Day on Nov. 8 underscored the market uncertainty and weighed on the U.S. currency.

ICE Brent Singapore December futures were trading at U.S. $46.11 per barrel on Nov. 7, compared to $49.66/bbl on Oct. 31.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

LNG Publishing shall not be liable for commercial decisions based on the contents of this report.