The N500 base oil import window opened today: based on Brent at USD 110.122/bbl (source: Public Market Data Feed, updated 2026-10-29T19:30), with FOB Middle East N500 premium at USD 12.5/bbl, freight + insurance + port charges at USD 28/MT, VAT at 13%, excise tax at 0%, and import tariff at 6%, plus USD/CNY exchange rate of 6.6702, the landed duty-paid cost of N500 is CNY 5,920/MT; domestic mainstream N500 quotation in East China stands at CNY 7,200/MT, resulting in a spread of CNY 1,280/MT — the widest in the past three months.

Import substitution driven by structural supply tightness

Rising fuel oil front-month prices directly compress the cracking economics for independent refiners’ base oil production. Combined with rising refinery maintenance rates in East China, N500 supply has tightened, increasing the necessity for import-based supply replacement.

N500 inventory at SNSUC’s bonded warehouse increased week-on-week, with sourcing shares from SK Korea and ADNOC Abu Dhabi rising.

Lubricant blending plants have clearly shifted procurement behavior: bonded warehouse receipt withdrawals in the third week of October accounted for a higher share of total procurement, significantly up from the prior month’s average.

The rise in butadiene rubber prices reflects cost transmission pressure in the synthetic rubber segment that has not yet passed through to base oil, confirming that current N500 dynamics are supply-constrained rather than cost-driven.

The slight decline in USD/CNY has neutral impact on import costs; however, the depreciation of EUR/CNY enhances the RMB-denominated pricing advantage for Eurozone base oil exporters, with recent inquiry volumes from Germany’s FUCHS and Italy’s ENI increasing.

Risk: Should Brent continue rising or East China refinery maintenance conclude earlier than expected, the import window may close within days. SNSUC clients are advised to immediately lock in N500 bonded warehouse receipts to secure spread gains; hedging strategy should include long positions in N500 import arbitrage and short positions in fuel oil front-month contracts to hedge against potential reversal of cracking logic.