• Taiwan's base oils exports rebounded from a 19-month low in May to slightly above average 2025 levels despite ongoing supply disruptions

• Exports to Southeast Asia rose to their highest in more than a decade, while shipments to China remained subdued amid softer demand

• The recovery added to signs that Asia Group II supply remained more resilient than expected and could face additional price pressure if Hormuz reopens

Taiwan's base oils exports recovered to near-normal levels in May despite ongoing supply disruptions, reinforcing signs that Asian supply remained firmer than expected during the region's biggest logistics shock in years.

Total exports rose to more than 49,000 tonnes in May from a 19-month low of 32,200 tonnes in April, Customs Administration data showed.

The recovery came against the flow. Feedstock disruptions and the loss of Middle East supply had persisted through May, while strong diesel margins had been expected to pull refinery output away from base oils.

Taiwan's shipments instead rose above average monthly levels in 2025, pointing to firm run rates and base oils output staying close to typical levels.

The resilience reinforced signs that regional Group II supply remained stronger than expected during a period when buyers had accelerated purchases to cover anticipated shortages.

Key Highlights

·         Shipments to Southeast Asia climbed to their highest in more than a decade after demand consistently outpaced regional supply in recent months

·         Exports to China edged up, with shipments constrained by slowing domestic demand and ample local availability.

·         Shipments to India fell to a three-month low ahead of a seasonal slowdown in demand during the coming months.

·         Group II heavy and light grades accounted for a similar share of total exports, with the heavy-grade share slipping from more than 55% of the April total.

Market Repercussions

Exports returned to above-normal levels while disruptions were still ongoing, adding to similar signals from South Korea, China and other Asian markets that supply outside the premium-grade Group III segment remained more sufficient than expected.

Supply remained sufficient even after buyers had accelerated purchases and built inventories during the disruption period.

Expectations that those disruptions will ease if flows through the Strait of Hormuz start to normalize would coincide with a seasonal demand slowdown.  

Steady supply, higher stocks and softer demand would curb the need for buyers to maintain elevated procurement and inventory levels, especially for Group II base oils.

The combination pointed to additional downside risk for prices that already faced pressure from weakening crude oil.