Asia’s base oils supply rose in November to its second-highest level in sixteen months, increasing the importance of strong regional consumption to absorb the additional volumes.

Demand duly extended its rise in November for a fifth straight month, helping to limit inventory pressure.

Lower exports and a larger share of those shipments moving to markets outside the region further eased pressure on regional stocks.

Asia’s total base oils supply recovered to more than 950,000 tonnes in November, up from less than 930,000 tonnes in October, government data showed.

The November volume was the second-highest since mid-2024 and extended its rise for the fourth straight month from year-earlier levels.

Key Highlights

·         Asia’s base oils exports fell to a three-month low in November, leaving the gap between supply and exports at its widest level in ten months.

·         The growing gap between supply and exports pointed to rising stocks among refiners and lower inventory pressure for overseas blenders.

·         Asia’s base oils exports to southeast Asia fell even more sharply to a fourteen-month low, as a larger share of shipments moved to other markets like the Americas.

·         Lower exports contrasted with a rise in southeast Asia’s demand, leaving consumption outpacing exports for the first time in five months and by the largest margin in more than a year.

·         Asia’s base oils exports to India fell to a four-month low, contrasting with the country’s sustained rise in lubricants consumption.

·         Asia’s total base oils supply still outpaced the region’s demand in November, but the surplus narrowed to its lowest level in four months and was more than 25% smaller than a year earlier.

Market Repercussions

The more manageable supply surplus cut pressure on refiners to aggressively clear volumes or target more distant export markets.

The tighter supply-demand balance in southeast Asia raised the prospect of stock-replenishment adding to the underlying demand strength.

The more balanced supply-demand fundamentals coincided with a rebound in Asia’s base oils prices relative to crude and diesel prices during the final weeks of last year and pointed to a continuation of that trend at the start of this year.