Asia base oils demand outlook: Week of 12 May

·         Asia’s base oils demand likely to ease as signs of weaker-than-expected lube consumption incentivize blenders to trim inventory levels.

·         Prospect of seasonal slowdown in consumption starting in a few weeks would coincide with expected completion of wave of plant maintenance work, boosting supply.

·         Firm base oils margins, prospect of weaker fundamentals and low crude oil prices add to incentive to procure sufficient volumes just to meet term commitments.

·         China’s base oils demand for overseas supplies could ebb amid signs of increasingly healthy availability from domestic refiners, especially of Group II base oils.

·         China’s base oils output holds firm in April 2025 despite heavy round of plant maintenance.

·         Base oils output likely to face upward pressure in May 2025 as plant maintenance draws to a close.

·         China’s domestic Group II N150 premium to Shandong diesel price rises to highest level since end-Q3 2024.

·         High premium already boosts incentive for domestic refiners to increase output that is set to get further boost from restart of base oils units.

·         Higher domestic output would cut requirements for supplies from overseas markets.

·         Base oils demand in southeast Asia could stay more muted, after already showing signs of slowing at end-Q1 2025, mirroring similar trend in markets like Japan.

·         Lower demand would follow weaker-than-expected economic growth in several key markets in southeast Asia in Q1 2025, even ahead of imposition of US tariffs at start of Q2 2025.

·         Singapore’s base oils exports to southeast Asia stay lower over last four weeks.

·         Sustained slowdown in shipments could point to regional blenders’ preference to maintain lower stocks.

·         India’s CFR Group II N150 cargo price premium to FOB Asia price matches highest level in more than a year, contrasts with sliding premium this time a year ago.

·         CFR India Group II N500 premium holds close to highest in more than a year.

·         Wide premium points to ongoing buying interest in additional supplies.

·         Any slowdown in buying interest would likely put pressure on price premium to narrow.

·         Base oils premium holds firm even with lower crude oil prices and as India’s lube demand falls in April 2025 from year-earlier levels for first time in five months.

·         Lower lube demand coincides with signs of firm base oils imports in April 2025.

·         Lower demand and rising imports raise prospect of speeding up replenishment of blenders’ lower stocks.

·         Those lower stocks follow dip in India’s net supply in Q1 2025 vs year-earlier levels.

·         Lower supply in Q1 2025 precedes round of plant maintenance work in India and Middle East in Q2 2025.

·         Wide price premium, and any requirement for additional shipments, could reflect moves to cover for dip in supply caused by plant maintenance work.

·         Any ongoing requirement for additional supplies for delivery in coming months would coincide with likely pick-up in regional output following completion of most plant maintenance work in May 2025.  

·         Any ongoing requirements for additional supplies could point to expectations that domestic lube consumption will continue to trend higher even after slowdown in April 2025 and with monsoon season starting in coming weeks.

·         Any ongoing requirements for additional supplies could trigger growing surplus if domestic lube demand instead extends slowdown that began in April 2025.

·         India’s demand for very-light grade base oils could get ongoing support as gap between CFR India N70 price and domestic retail diesel prices widens further.

·         Wide price-gap often coincides with stronger demand for very light-grade base oils.