Asia April Lubricants Demand Extends Rise, Supply Surplus Widens

Asia's lubricants demand rose for a tenth straight month in April, but supply continued to grow faster, widening the market surplus and pointing to stronger underlying availability than demand figures alone implied.

Total lubricants demand rose to more than 875,000 tonnes in April, up 2% from a year earlier, according to Ministry of Energy, METI, KPA, PSA and other government data.

The volumes excluded China.

Demand had surged to a record high in March as buyers accelerated procurement ahead of anticipated supply disruptions.

India's demand fell to a 14-month low in April, pointing to a slowdown in underlying consumption even as demand remained firm elsewhere.

Key Highlights

·         Southeast Asia consumption held above 200,000 tonnes for a fourth straight month after previously exceeding that level only once during the prior six years.

·         Philippines base oils and lubricants imports rose at their fastest pace in 14 months and Vietnam's imports surged, adding to signs of continued inventory-building in the region.

·         Asia's base oils supply rose 12% year on year and exceeded one million tonnes for the fourth time in five months.

·         Supply outpaced demand by more than 120,000 tonnes, above year-earlier levels and widening the surplus to a three-month high.

Market Repercussions

The widening surplus pointed to supply that remained more than sufficient to cover regional requirements despite ongoing concern about disruptions to global supply chains.

Demand continued to rise across much of Asia. But the contrast between the sharp slowdown in India and unusually strong growth in Southeast Asia pointed to stock-building playing a large role, in addition to end-user consumption.

Supply exceeded demand even with the surge in procurement to buffer stocks, pointing to a build-up of inventories at both producers and blenders.

The wider surplus also added to the incentive for arbitrage shipments to Europe and the Americas, where prices remained well above Asian levels.

Any further drop in exports from Singapore could still tighten conditions in the region. But higher production elsewhere in Asia, larger inventories and the approach of the seasonal summer slowdown suggested regional supply should remain adequate to cover requirements.

The balance pointed to supply that was sufficient across most of the market, with any tightness selective rather than broad-based.