Output rises to six-month high; imports climb to 40-month high
Rising imports cover larger share of blenders' requirements, amplifying rise in Group I supply
Rising Group I supply adds to regional surplus and pressure on margins
Japan’s base oils supply rose to a one-year high in October, driven by a rebound in domestic output and surge in imports that further reshaped Asia’s Group I market dynamics.
Total supply, or domestic production plus imports, reached 198,000 kilolitres (175,000 tonnes) in October, METI data showed.
The volume marked a sharp recovery from the sub-170,000-kilolitre levels during the previous five months, when Japanese production slumped to a multi-year low.
The earlier drop in supply added to tighter-than-usual supply-demand fundamentals across Asia during that period.
Domestic production began recovering in September and extended its rise in October to a six-month high.
The pick-up in Group I supply added to the broader recovery in availability across southeast Asia, as well as from China.
Rising supply weighed on Asia’s Group I heavy-grade base oils prices especially relative to gasoil and to Group II prices, starting from the middle of the third quarter of the year.
The ongoing surplus extended that price-pressure into the fourth quarter of the year.
Japan’s Group I balance could loosen further after imports hit a forty-month high in October.
Most of the shipments originated from South Korea and Qatar, providing domestic blenders with premium-grade supplies that covered more of their feedstock requirements.
The inflows cut their demand for Group I base oils just as output was recovering – amplifying the regional surplus.