NewsFlashAsia base oils hit high on gasoil surge

27 May 2008 09:14  [Source: ICIS news]

SINGAPORE (ICIS news)--Historic high crude and gasoil prices alongside itght supply have propelled Asian base oil values to unprecedented levels, said base oil buyers and sellers on Tuesday.

Spot offers for Group I and II solvent neutrals/neutral grades have spiked to $1,200-1,300/tonne FOB (free on board) Asia, nearly 50% higher than a year ago, said regional sellers.

Woefully tight supply had exacerbated the pricing situation, said regional traders.

“There is no additional base oil volume in the market and [it is] difficult to secure cargoes despite high prices,” said a southeast Asian trader.

Gasoil prices have been so high that many of the Asian base oil producers have cut base oil production to maximise fuels output, said a regional base oil maker.

Gasoil prices were hovering at $1,280/tonne ($170/bbl) and base oil producers were targeting similar numbers for base oils.

Demand has held up well until now in the face of surging prices, said buyers and sellers.

Big buyers like China had seen strong demand in the first four months of the year. Buying interest in India and southeast Asia has also been strong, said regional traders. although one did suggest this might start changing soon.

Downstream lubricant makers are reeling due to disappearing margins, and many of the non-integrated small-to-medium sized blenders may soon be forced to shut shop, said a Taiwanese blender.

Only the integrated refinery and lube makers may survive these high costs, he added.

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By: Anu Agarwal
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