The second half of 2014 saw a steep decline in Group II spot prices, brought about primarily by slides in upstream crude prices which coincided with the start-up period of new Group II facilities in both the US and northeast Asia.
Referencing ICIS data, spot prices for Group II’s high viscosity grade 500N dipped from an average of 1,037.50/tonne FOB NE Asia on 6 June to $745/tonne FOB NE Asia on 28 November, reflecting a decrease of around 28%.
Other key developments in the Asian base oils market seen this year are:
In the coming year, ICIS market expert sees the Asia base oils market to remain stable-to-soft for the first quarter of 2015, especially for the Group II sector. This was on the back of steep declines in upstream crude prices seen from September to November.
Lacklustre demand seen from key markets such as China would also contribute to the pessimism plaguing the near term outlook for the Asia base oils market.
Other factors seen that will contribute to the downward spiral of base oils spot prices are the increasing competition from deep sea cargoes (from the US, European and Middle Eastern regions) and the stiff competition amongst regional refiners.
Looking at supply, upcoming Group II facilities in the Middle East in the first quarter of 2015 are expected to add to the supply glut, which would be likely to weigh on the movement of northeast Asian Group II cargoes to the Middle East.
As for demand, opinions among market players were mixed. Some market players were confident of restocking activities among regional importers in January and February ahead of the Lunar New Year holidays in Asia, whereas others held on to opposing views.
A northeast Asia-based buyer said, “Buying activity is traditionally expected to pick up before Lunar New Year, but with the current weak market conditions, I find it hard to believe that the base oils market will show significant improvement within the next two months. Most buyers are still trying to keep inventories lean to stem losses from the existing material on hand.”.
However, most market sources said that the broad direction in which base oils spot prices will move in the next quarter still depends heavily on upstream crude and gas oil prices.
ICIS publishes a suite of base oils prices covering all the key main grades traded globally. It includes access to spot price history, way back up to 2010.
The raw data may be downloaded in excel format which can easily be integrated into your own pricing models to derive a reliable basis for contract price settlements.