· Asia's premium-grade base oils imports from the Middle East stayed unusually low in July, as one-off shipments did little to ease the region's underlying supply squeeze
· Hong Kong went a second straight month without any imports from Qatar, only the second time that has happened since 2017
· The slowdown is set to persist through the third quarter as tighter supply meets rising demand and scheduled maintenance
Asia's premium-grade base oils imports from the Middle East stayed unusually low in July, with a modest pick-up offering little real relief as the slowdown extends through the third quarter.
Imports of Group III base oils from the Middle East rose to close to 15,000 tonnes from less than 1,500 tonnes in June, but remained among the lowest in the past 19 months, Enterprise Singapore, Hong Kong's Census and Statistics Department and other government data showed.
The improvement appeared to be a one-off and came almost entirely from Singapore, which took delivery of shipments from Qatar and the UAE.
Those cargoes likely left the Middle East during a brief pick-up in flows through the Strait of Hormuz in second-half June, after being produced earlier in the year.
The small pick-up did little to change Asia's premium-grade supply position, with the slowdown set to persist through the third quarter as those one-off factors showed no sign of repeating.
Key Highlights
· Hong Kong went a second straight month without any base oils imports from Qatar, only the second time that has happened since 2017.
· Asia's three-month average imports from the Middle East fell to around 17,000 tonnes, the lowest in more than six years and down from typical monthly volumes before May of more than 65,000 tonnes.
· Middle East imports accounted for just 0.2% of Asia's base oils output plus Middle East imports in June, down from more than 6% before the disruption.
Market Repercussions
A continuation of the slowdown through the third quarter would leave the market dealing with lower Middle East supply, a seasonal rise in demand and scheduled Group III plant maintenance, all at the same time.
Asia would still be better placed than Europe and especially the US to absorb that combination, given its own Group III producers in South Korea, China, Malaysia, and India.
But less of that alternative supply is available within Asia as South Korea and India direct more of their own Group III supply to the Americas and Europe instead, while maintenance in Malaysia curbs flows from that source.