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Asia’s lubricants demand climbed to a record high in March, with forward procurement adding to a seasonal rise in consumption
Strong demand absorbed much of a surge in regional base oils supply, limiting the surplus build and leaving a thinner buffer ahead of an expected supply slowdown
Signs of a supply slowdown were already emerging, while surging prices and slower economic activity weighed on lubricants consumption
Asia’s lubricants demand rose to a record high in March as buyers accelerated procurement ahead of expected supply disruptions, adding to a seasonal pick-up in consumption and offsetting a surge in regional base oils supply.
Total lubricants consumption rose to more than 1 million tonnes in March, up 11% year on year and climbing for a ninth straight month, METI, Ministry of Energy, KPA and other government data showed.
Lubricants demand kept pace with rising base oils supply, which climbed to more than 1 million tonnes in March, up from less than 940,000 tonnes in February and was 18% higher year on year.
The sustained rise in consumption absorbed most of the additional supply, easing earlier concerns about a build-up of surplus volumes as new production capacity came online.
The same demand strength that eased surplus concerns then left the market with less cover when supply began to slow.
Key Highlights
· Southeast Asia demand rose more than 25% year on year, while northeast Asia demand climbed 10% and India’s consumption rose 5%.
· Asia’s total base oils supply exceeded 3 million tonnes in the first quarter, climbing 14% year on year to the highest in at least nine years.
· Supply exceeded demand by less than 100,000 tonnes in February and March combined, up from less than 50,000 tonnes a year earlier, even with supply rising more than 250,000 tonnes.
Market Repercussions
The surge in first-quarter supply enabled blenders to secure additional volumes in March, curbing the urgency for a typical round of stock replenishment at the start of the second quarter.
Even so, the sustained rise in demand slowed a build-up of inventories in markets such as India, leaving less room to build stocks ahead of peak seasonal demand.
Sustained demand at March levels would pull forward subsequent replenishment requirements, adding to pressure on tighter supply.
Such a slowdown in supply showed signs of materialising as refiners adjusted run rates in response to feedstock constraints and a focus on maximising motor fuel output.
But demand also faced growing challenges from higher base oils prices, fuel shortages and slower economic activity.
