Asia Lubricant Demand To Post Modest Growth, Says ExxonMobil

Economic slowdown in the Asia Pacific region seen as the reason for modest growth.

Demand for lubricants is likely to face moderate growth in the Asian region, particularly the Asia Pacific, in the coming years. While it is an indication of a shift towards superior class base oils, the slowdown is due to slow, but moderate economic development in the region. This was stated by XB Cox, ExxonMobil (NYSE:XOM) global base-stocks and specialties planning manager, during an interview with ICIS.

His comments hold weight, as China is facing sixth year of slowdown in economic growth, growing at a rate of 7% high by developed countries standard. Exxon expects demand for higher quality Group II base oils to gain a lot of traction; it is moving to boost its production base stock. Group II base oils are proving to be a popular choice owing to its low sculpture content and improved performance, though it is inevitably likely to cost more.

Earlier this year, Exxon Mobil introduced its Group II stock to the Asian markets once it completed civil works expansion of its Singapore lubricant base stock factory. It has boosted capacity from 400,000 tons to more than 1.5 million tons/year. Simultaneously, the largest US oil and gas major is set to commence production of its Base II oils at its Rotterdam refinery in the Netherlands by 2018, though it is currently subject to funding and regulatory approval.

Cox has stated that the shift from Base I to Base II oils will be gradual, while pointing to long vehicle turnover times, customer buying behavior, fuel quality limitations, and the fact that consumers may still give priority to cost over performance of oil base.

Group II and Group III base oil production capacity  is due to rise by less than 7 million tons over the course of the years ahead, with one quarter  of that coming from the Asia Pacific region, but this will also result in the exacerbation of the current Group II/III excess in the region.

Exxon Mobil had predicted a few years ago that the demand for energy from the Asia Pacific region would rise between 30-45% till the year 2030, according to its global energy outlook for the future that it publishes every few years to give a glimpse on the scope of the energy market. It has also mentioned that lubricants, particularly high valued base oils, will see significant rise in the future, despite the current surplus in the Asian region.

Exxon Mobil’s stock price ended the day at $82.83, down 1.26% since the previous day.