Asia’s January Lubricants Demand Extends Rise For Seventh Month

Asia’s lubricants demand rose in January for a seventh straight month, absorbing much of the region’s rising base oils supply and leaving stocks tighter than usual ahead of a seasonal pick-up in demand and growing risks to Middle East feedstock flows.

Asia’s total lubricants consumption rose to more than 930,000 tonnes in January, holding above that level for a second month and climbing by more than 10% year on year, METI, Ministry of Energy, and other government data showed.

The sustained rise in demand since the middle of last year absorbed most of the region’s increase in base oils supply, keeping stocks tighter than usual at year-end and increasing exposure to any disruption to replenishment flows.

Key Highlights

·         Southeast Asia demand rose for a third straight month in January, climbing more than 20% year on year as firm consumption in Vietnam and Indonesia countered an ongoing slide in Thailand.

·         Thailand’s lubricants consumption fell to 40,500 kilolitres (36,000 tonnes), dipping 22% year on year and for the tenth time in eleven months amid a simultaneous slump in engine oil and industrial oil demand.

·         Vietnam’s base oils and lubricants imports stayed unusually high for a second month, boosted by a surge in shipments from South Korea.

·         Northeast Asia demand rose by more than 15% and for a second month, boosted by a sustained rebound in Japan’s consumption.

·         Broad-based growth in those markets reduced over-reliance on India as the region’s sole demand driver, even as its consumption has surged since the middle of last year.

Market Repercussions

Asia’s lubricants consumption growth reflected firm economic activity across key markets such as India and Vietnam.   

Growing demand provided key outlets for the region’s rising base oils supply, keeping availability tighter.

Those conditions now face major adjustments.

Surging crude oil prices and any extended disruption to feedstock supplies from the Middle East could slow economic activity across the region, weighing on lubricants consumption and encouraging blenders to keep leaner stocks.

But tighter base oils availability pointed in the opposite direction, with higher stocks providing a buffer against supply disruptions.