Asian Base Oil Markets Weaken as Heavy Grades Face Strong Downward Pressure Amid Ample Supply

Key Highlights

1. Heavy-grade base oils recorded notable drops amid broad oversupply.
2. Lubricant demand weakened further across automotive and industrial sectors.
3. High regional inventories drove buyers to delay spot purchases.
4. Market continues to trend bearish with expectations of additional price cuts.

Asian Base Oil Prices Stay Soft as Heavy Grades Face Pressure

Spot base oil prices in Asia were stable to soft, with heavy grades facing the most downward adjustments due to weak demand and increasing availability.

• Ex-tank Singapore:
  1. Group I SN150 steady at $780–$820/t
  2. SN500 down $10/t to $950–$990/t
  3. Bright stock down $10/t to $1,340–$1,380/t
  4. Group II 150N steady at $820–$860/t
  5. 500N down $10/t to $990–$1,030/t
• FOB Asia:
  1. Group I SN150 steady at $680–$720/t
  2. SN500 down $10/t to $790–$830/t
  3. Bright stock lower by $10/t at $1,180–$1,220/t
  4. Group II 150N stable at $710–$750/t; 500N down $10/t to $820–$860/t
• Group III:
  1. 4 cSt steady at $1,080–$1,120/t
  2. 6 cSt down $10/t to $1,060–$1,100/t
  3. 8 cSt at $920–$960/t

Crude oil futures also softened early in the week as Russian exports resumed at Novorossiysk, though earlier supply disruptions had supported prices.

Demand & Supply: Weak Lubricant Demand and High Inventories Weigh on Market

Demand remained weak across multiple segments:

• The automotive sector, the largest base oil consumer, continued to see reduced lubricant demand due to vehicle electrification, longer drain intervals, less driving, and stricter emission standards.
• Industrial oils faced lower demand due to sluggish manufacturing across Asia. Economic slowdowns were reported in Thailand, Singapore, Japan, and the Philippines.
• Supply was abundant, with heavy grades in oversupply across China, Southeast Asia, and India.
• Buyers across Asia preferred to use existing inventories, anticipating further price declines.
• Exporting excess volumes was difficult for producers because global inventories were also high, limiting arbitrage options.
• A broad year-end destocking trend further reduced spot buying, adding pressure on prices.

Market News: Regional Supply Builds Despite Refinery Turnarounds and Restarts

• China, India, Southeast Asia, and Japan all reported softness in heavy-grade demand and growing supply.
• A Chinese producer shipped Group I SN500 + Group II N150 cargo to Malaysia, showing mixed-grade movements in the region.
• Multiple refinery turnarounds and restarts occurred globally across Group I, II, and III plants, influencing availability but not tightening the market significantly due to already high stocks.
• SK-Pertamina’s Dumai Group III plant in Indonesia has restarted after a precautionary shutdown following a fire at the associated refinery.
• Several large-scale shipments were reported across Asia (Singapore, Japan, South Korea, Thailand), indicating steady logistical flows.
• Crude oil markets saw volatility due to geopolitical tensions and temporary export disruptions in Russia.

Market Expectation: Bearish Outlook Ahead as Oversupply and Weak Demand Persist

The market outlook remains bearish, driven by:

• Continued oversupply, especially in heavy grades
• Weak downstream demand from automotive and industrial sectors
• Buyers’ reluctance to make fresh purchases ahead of potential further declines
• Expectations of more competitive Group II offers from the United States as inventories loosen post-hurricane season
• Domestic suppliers in China and India likely to continue adjusting prices downward to clear stocks

Overall, the Asian base oil market is expected to remain pressure-laden, with soft prices and limited demand, especially as year-end inventory reduction continues.