Tight Global Supply and Renewed Trade Hopes Propel Base Oil Market Dynamics

Key Highlights

• Brent crude surged 9% in a week, but base oil markets in Asia stayed mixed due to oversupply and weak demand.
   
• Group I Bright Stock remains firm on tight supply, especially in China and India; SN500 prices softened slightly.
   
• Group II oversupply pressures prices despite recent crude rally; GS Caltex and Hyundai Oilbank restarts add volumes.
   
• Group III tightness persists due to global turnarounds, driving up prices; Indian buyers accept higher CFR offers amid limited cargoes.

Base Oil Prices Remain Mixed Across Asia

As per lubesngreases.com, crude oil prices saw a sharp rebound on renewed optimism over the U.S.–China trade truce.

• Brent crude for July 2025 rose from $60.41/bbl (May 5) to $65.85/bbl (May 12) 
• Dubai crude (June 2025) increased from $60.65/bbl (May 2) to $63.64/bbl (May 9)

- Base oil spot prices in Singapore remained mixed this week. In the Group I segment, SN150 held steady at $800–$840/MT, while SN500 declined by $10 to $1,030–$1,070/MT. 

Bright Stock remained firm at $1,380–$1,420/MT. For Group II ex-tank Singapore, 150N dipped by $10 to $830–$870/MT, while 500N remained stable at $1,080–$1,120/MT. 

In the FOB Asia market, Group I SN150 stayed unchanged at $660–$700/MT, while SN500 edged up by $10 to $920–$960/MT and Bright Stock increased by $10 to $1,270–$1,310/MT.

Group II FOB grades 150N and 500N both fell by $10, now at $680–$720/MT and $960–$1,000/MT, respectively. 

Group III grades showed a $10 increase across the board, with 4 cSt at $1,080–$1,120/MT, 6 cSt at $1,090–$1,130/MT, and 8 cSt at $960–$1,000/MT.

Demand and Supply Dynamics: Weak Downstream Activity Caps Market Optimism

• Group I: Supply remains tight in Asia due to plant shutdowns in Japan, Southeast Asia, and the Middle East. Bright stock, in particular, is in short supply despite weak demand, maintaining high price levels. India faces import pressure due to an Iranian plant turnaround, but local production has helped offset deficits.
• Group II: Supplies are growing post-maintenance, especially from GS Caltex (South Korea), which completed a restart in late April. Increased regional supply has softened prices in both India and China. Domestic Group II production in India is stable and supporting demand, though U.S. imports remain limited due to price and turnaround constraints.
• Group III: Tight global supply from turnarounds in South Korea, the Middle East, and Europe is driving prices up. In India, buyers have limited choices and are accepting higher CFR prices, while Chinese interest in imported cargoes has weakened due to lower domestic pricing.

Global News Highlights and Key Production Updates

• Crude oil surged 3% after the U.S. and China temporarily slashed tariffs, giving energy and base oil markets a boost.
• Reduced duties were welcomed across the lubricant value chain, as previous tariffs had strained both U.S. and Chinese producers of key raw materials like additives and PAOs.
  China: Bright stock remains tight due to structural deficits. 
• Fushun plant may compensate for the Dalian closure but is yet to confirm volumes. Group II demand is low, and feedstock prices (ACN, butadiene) continue to weaken
• India: Domestic Group I supply is steady despite an upcoming HPCL turnaround. Imports remain costly due to fewer cargoes from the Middle East and Southeast Asia. Group II spot prices are under pressure with new South Korean volumes expected.
• Production Updates:
  A. India: HPCL, BPCL, and Chennai Petroleum completed or scheduled major maintenance programs.
  B. China: PetroChina and Sinopec plants undergoing turnarounds; permanent closures continue to tighten supply.
  C. South Korea: GS Caltex and Hyundai Oilbank gradually resuming operations.
  D. Middle East & Europe: Turnarounds at ADNOC, Luberef, Bapco, and ILBOC (Spain) are affecting Group II/III output.
  E. U.S.: Chevron’s Pascagoula plant was down for 3–4 weeks in April, limiting spot Group II availability.

Market Expectation: Base Oil Prices Likely to Stay Under Pressure

• Despite a temporary rebound in crude oil prices and tariff relief, the base oil market in Asia remains under pressure from oversupply (especially Group II) and weak downstream demand. 
• Group I bright stock is expected to stay firm due to tight supply. However, unless industrial demand strengthens or more shutdowns curb production, prices may stay soft or correct further in the short term.