Asia base oils demand outlook: Week of 14 April

·         Asia’s base oils demand likely to be more muted as unusually extreme market volatility boosts incentive for buyers to keep inventories at lower levels.

·         Uncertainty about outlook and sharp fall in crude oil prices so far this month add to incentive to hold back.

·         Blenders could face lower-than-usual inventories at start of Q2 2025 because of tight supply and firm demand in Q1 2025.

·         Southeast Asia’s lube demand almost matches Asia-Pacific base oils exports to the region in three months to Feb 2025.

·         Dynamic leaves supply-demand balance tighter than year-earlier levels and much tighter than during same period in 2023.

·         Blenders still face less urgency to replenish depleted stocks as uncertainty about economic outlook coincides with likely seasonal slowdown in demand in coming months, especially versus month of March.

·         Asia’s lube demand faces prospect of sharper seasonal dip from end of Q2 2025.

·         Prospect of lower demand adds to incentive for blenders to procure supplies more slowly.

·         China’s demand for overseas supplies of Group III base oils likely to stay more muted in face of surging domestic output.

·         China’s demand for Group II base oils could ease if more blenders procure more Group III base oils instead.

·         Feasibility of such a scenario grows after China’s domestic Group III price premium to Group II prices falls to lowest in more than three years.

·         Any such pressure on China’s Group II base oils demand could compound its more muted buying interest in Group II supplies from overseas markets.

·         China’s demand for Group I base oils could stay firmer as country’s low production compounds impact of ongoing plant maintenance work.

·         China’s domestic Group I light/heavy-grade price differential continues to strengthen vs Group II base oils.

·         China's domestic Group I brightstock premium to FOB Asia cargo price extends rebound to highest in a year.

·         Rising brightstock premium to FOB Asia prices points to ongoing requirements for supplies from overseas markets, despite signs of rising domestic brightstock production.

·         Ongoing demand for overseas supplies suggests current domestic supplies are insufficient or their specifications differ from what blenders require.

·         Singapore’s base oils exports to India over last four weeks fall to lowest level in more than two months.

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

·         Drop in shipments coincides with likely slowdown in base oils requirements following peak-demand period in month of March.

·         Any moves by blenders to slow the pace of stock-replenishment plans could add to dip in requirements.

·         India’s lube demand surges in March 2025 to second-highest level in three years.

·         Surge in lube demand likely outweighs base oils supply, cutting blenders’ stocks.

·         Dynamic likely prompted blenders to line up more replenishment shipments for arrival at end-Q1 2025 and start of Q2 2025.

·         Arrival of those shipments, combined with typical seasonal slowdown in Q2 demand vs Q1, could curb urgency for buyers to seek additional volumes.

·         Slump in crude oil prices since start of April 2025, combined with blenders’ sufficient stocks, adds to their incentive to hold back.

·         Expected improvement in domestic and overseas base oils supply following completion of plant maintenance work in Q2 2025 increases further the incentive for blenders to limit any stock-build.

·         Market volatility could boost attraction of procuring more domestic supplies or overseas supplies from markets that are logistically relatively close to India.

·         Any such move could curb demand for supplies from more distant sources like US.

·         Signs of pick-up in shipments from Saudi Arabia in recent weeks could curb further buyers’ interest in or need for supplies from US.

·         India’s imported Group II N500 cargo price extends rise vs Group I prices, vs FOB Asia prices, and vs FOB US export prices.

·         Premium extends rise even against backdrop of this month’s slump in crude oil prices and prospect of more muted demand in Q2 2025 vs previous three months.