Asia base oils demand outlook: Week of 14 July

·         Asia’s base oils demand shows signs of facing weaker-than-usual pressure from expected seasonal slowdown in consumption coming weeks.

·         Firmer prices for light grades relative to heavy grades, for Group I SN 500, and for prices in India point to ongoing pockets of buying interest even with seasonal slowdown in demand.

·         Prices for Group II heavy grades by contrast weaken vs light grades and vs Group I base oils.

·         FOB Asia Group II N500 premium to SN 500 slips to eight-month low in H1 July 2025.

·         Shrinking Group II heavy-grade premium reflects combination of softer Group II heavy-grade supply-demand fundamentals and firm Group I SN 500 fundamentals.

·         Any extension of that dynamic, and more competitive prices for Group II heavy grades, could conversely start to spur firmer demand for the product.

·         Prospect of seasonal slowdown in Asia’s lube demand in coming weeks would follow unusually firm consumption in recent months.

·         Asia’s lube demand falls in May 2025 from year-earlier levels but extends steady upward trend in recent years.

·         Firm consumption in first five months of 2025 contrasts with squeezed base oils output, curbing build-up of surplus supplies.

·         Lack of any significant surplus curbs pressure on significant price-adjustment to clear those volumes.

·         Prospect of steadier prices could support steadier consumption in Asia and in more distant markets like Middle East.

·         China’s demand for base oils from overseas markets could get boost from lower domestic base oils output that fell to twenty-one-month low in June 2025.

·         China’s domestic Group II price for imported supplies continues to outpace prices for domestic supplies.

·         Wider price-premium for imported supplies typically triggers rise in demand for supplies from domestic sources.

·         Any extended slowdown in China’s domestic base oils output could curb availability, complicating any such moves.

·         China’s domestic Group II price for imported supplies maintains steep premium to FOB Asia cargo prices.

·         Steep premium sustains feasibility of moving more regional cargoes to China.

·         Any extension of that trend could cushion impact of typical seasonal slowdown in demand in other parts of Asia.

·         Any such pick-up in shipments to China so far shows little sign of materializing.

·         Singapore’s base oils exports to China extend sharp slide over last four weeks.

·         Any extended slowdown in Singapore’s exports to China, combined with its lower domestic output, could squeeze supply more than expected.

·         Any such drop in supply would coincide with seasonal slowdown in China’s demand in month of July especially.

·         Lower-than-expected supply could limit any build-up of surplus volumes, boosting strength of round of stock-replenishment later in Q3 2025.

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

·         Slowdown coincides with signs of sharper slowdown in lube consumption in some markets in that region.

·         Vietnam and Philippines base oils/lube imports fall in May 2025 for third straight month, reflecting that dynamic.

·         India’s base oils demand shows signs of holding relatively firm even at a time of year when country's lube demand faces seasonal slowdown.

·         India’s imported Group I SN 500 cargo price outperforms Group II heavy grades, as well as Group I heavy-neutrals prices everywhere from Asia to Europe.

·         Outperformance of CFR India Group I SN 500 price points to increasingly firm fundamentals for the grade.

·         Outperformance of Group I SN 500 price could point to concern about tighter availability of supplies from Middle East.

·         India’s imported Group II heavy-grade cargo price premium to FOB Asia price matches highest in more than a year.

·         Higher premium points to ongoing buying interest, sustains attraction of moving more shipments to India.

·         Ongoing buying interest contrasts with fall in India’s lube demand in June 2025 and in Q2 2025 from unusually high levels a year earlier.

·         India’s lube demand still holds at second-highest level for month of June and for second quarter in more than a decade.

·         Firm demand leaves India’s lube demand in H1 2025 at highest level for that period in more than a decade.

·         Rising demand contrasts with steady domestic base oils output, leaving country more reliant on additional imports to cover requirements.

·         Dynamic likely to continue until domestic consumption falls or new production capacity starts up in India.

·         Domestic consumption more likely to extend rise rather than fall.

·         New production capacity in India scheduled to start up in Q4 2025, after initial start-date of earlier this year pushed back.

·         Any further delays to start-up of new capacity would increase further India’s reliance on overseas markets to cover growing domestic requirements.

·         Pakistan’s base oils demand could hold firm as drop in supply in recent months contrasts with signs of rising lube consumption.

·         Pakistan’s base oils supply in three months to May 2025 falls to seven-month low.

·         Lower supply contrasts with sustained rise in country’s lube consumption.

·         Dynamic raises prospect of pick-up in demand for base oils supplies to replenish squeezed inventories.

·         Competition among overseas suppliers intensifies to meet Pakistan’s base oils demand.

·         Surge in shipments from Taiwan to Pakistan in 2025 follow sustained pick-up in shipments from US to Pakistan in 2024-2025.

·         Rise in shipments cuts Singapore and South Korea’s share of Pakistan’s base oils imports to less than 55% of total in 2025, down from 80% in 2024.

·         Competition for market share could intensify further when new production-capacity starts up in Asia in coming months.