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Japan's June base oils supply rose to a three-month high as higher production and recovering imports left demand comfortably covered
Elevated output across Japan, South Korea, China and India continued to support Asian supply despite Middle East disruptions
The contrast with tighter US and European markets pointed to Asia remaining the primary source of additional spot base oils cargoes
Japan's base oils supply rose in June as production continued to outpace demand, adding to Asia’s relatively comfortable supply position despite Middle East disruptions.
Total supply, or domestic production and imports combined, rose 12% year on year to 192,400 kilolitres (171,000 tonnes), Ministry of Economy, Trade and Industry data showed.
The increase left production comfortably ahead of demand even after exports rebounded, extending a broader trend of elevated base oils output and exports from other key suppliers including South Korea and China.
The steadier supply and firmer exports contrasted with the US and Europe, where tighter domestic balances reduced export availability.
Key Highlights
· Base oils production rose for a fourth time in five months, even as Japan's diesel and jet fuel output declined.
· Production rose faster than asphalt, widening the base oils surplus to the second-highest level in 13 months.
· Total supply exceeded demand by almost 22,000 kilolitres, the second-largest surplus in nine months, even after a rebound in exports.
· Imports accounted for 7% of supply, up from a 28-month low of 4% in May and closer to typical levels.
Market Repercussions
Japan's data added to a broader Asian pattern, with higher output in South Korea and China and rising supply in India together offsetting more of the impact from disrupted Middle East shipments.
In the US, collapsing Middle East imports left domestic output covering a larger share of demand. Europe followed a similar path, keeping more of its own premium-grade supply at home rather than exporting it.
Asia has remained relatively well supplied even as the US and Europe have tightened. The resulting price discount looks set to persist for as long as Middle East disruptions continue.
