Base Oil Prices Steady in Asia Despite Monsoon-Led Demand Slowdown

Key Highlights:

• Prices stayed firm across Group I, II, and III due to limited supply and rising crude oil benchmarks.
• Refinery turnarounds in Thailand, Japan, and Korea continued to restrict availability of key grades.
• Demand weakened in India and China due to monsoon and low industrial activity.
• Market to stay tight for Group I and light Group II cuts; Group III may improve.

Petroleum and Oil Price: Base Oil Price Trends – Mid-July Update

Base oil spot prices across Asia remained stable to firm in mid-July, supported by constrained availability in several grades and rising crude benchmarks.

• Group I SN150 and SN500 saw upward adjustments of $10/t ex-tank Singapore, moving to $810–$850/t and $1,070–$1,110/t, respectively.
• Bright stock prices remained firm at $1,380–$1,420/t, reflecting tight supply globally.
• Group II 150N and 500N held at $850–$890/t and $1,100–$1,140/t, respectively, ex-tank Singapore. FOB Asia values also stayed firm. 
• Group III 4 cSt and 6 cSt remained in the $1,100–$1,160/t range, while 8 cSt firmed to $970–$1,010/t, amid supply constraints from South Korea.

Crude oil benchmarks rose slightly week-on-week:

• Brent September futures moved up to $71.06/bbl from $67.54/bbl. 
• Dubai front-month futures (Platts, August) increased to $69.45/bbl from $67.67/bbl.

Demand and Supply: Regional Supply Constraints Remain

Supply-side tightness remained a defining feature of the market:

• Group I availability was especially limited, with turnarounds in Thailand and Japan reducing regional output. Indonesia closed tenders for flexitank cargoes, including bright stock. 
• In India, import scarcity—especially from the Middle East—drove CFR prices up by $5/t despite weak demand caused by the monsoon. 
• Group II supply tightened for lighter grades (e.g., 150N) due to past turnarounds in South Korea and Taiwan, though domestic supply in China increased. 
• Group III grades were stable to tight, with 8 cSt facing upward pressure due to reduced South Korean availability and steady demand from Europe and the U.S.

Demand was tepid across key markets:

• China’s base oil demand slowed due to weak industrial output and declining exports amid U.S. trade tensions.
• India’s monsoon season dampened activity in automotive, construction, and agriculture sectors. 
• Buyers across Asia focused on fulfilling contract commitments or resorted to on-demand purchases.

Market News: Refinery Turnarounds & Recovery Status

• Refinery Turnarounds: Group I and II turnarounds continued across Thailand, Japan, South Korea, China, and India, though many plants were now resuming operations. Notably: Thai Lube began a 45-day Group I shutdown in July. 
• GS Caltex and Hyundai Oilbank (South Korea) completed turnarounds and returned to market. PetroChina’s Fushun expansion aimed to replace lost capacity from the Dalian refinery closure.
• Shipping Activity: Spot shipping inquiries increased, with multiple shipments planned from Southeast Asia and Korea to destinations including China, Bangladesh, and UAE. 
• Geopolitical Factors: Oil markets remained volatile amid reduced concerns over Middle East tensions and a renewed focus on supply/demand fundamentals. IEA noted the market was tighter than perceived due to high refining rates. 
• Trade War Impact: China’s exports to the U.S. continued to shrink amid new tariffs, pressuring base oil demand in marine and industrial sectors.

Market Expectation: Prices Likely to Stay Firm

The Asia base oils market is expected to remain supply-constrained for certain key grades, especially:

• Bright stock and light Group II cuts due to ongoing or just-concluded turnarounds. 
• However, Group II and III supplies may improve gradually as refiners ramp up rates and more cargoes enter the market.

Demand is likely to remain soft in the near term due to:

• Seasonal monsoon slowdown in India. 
• Weak industrial recovery in China. 
• Limited appetite for spot purchases amid uncertain macroeconomic conditions.

Price direction is expected to remain stable to firm, particularly for tight grades, while broader sentiment will hinge on:

• Crude oil trends, 
• Post-turnaround supply normalization, 
• Resurgence in downstream lubricant demand post-monsoon.