Asia base oils demand outlook: Week of 17 Feb

·         Asia’s base oils demand likely to get support from upcoming seasonal rise in consumption throughout the region, and blenders’ need to replenish stocks accordingly.

·         Demand could get further support from persistently firm domestic consumption in India and signs of lower inventories in southeast Asia.

·         Firmer base oils prices and prospect of tighter supply add to incentive for buyers to lock in requirements.

·         Asia’s lube demand set to get seasonal boost over coming months.

·         Rise in lube demand would boost requirements for base oils feedstock supplies.

·         Rise in demand set to coincide with round of plant maintenance work throughout Asia in H1 2025.

·         Seasonal rise in demand and prospect of tighter supply could incentivize blenders to lock in additional requirements.

·         China’s base oils demand shows signs of staying weaker than usual for time of year.

·         Taiwan’s base oils exports to China stay low in Jan 2025.

·         Low volume likely partly reflects impact of Lunar New Year holidays, which fell in month of January this year.

·         Lunar-New-Year effect should mean strong pick-up in Taiwan’s exports to China in Feb 2025.

·         Taiwan’s exports to China stay low so far in Feb 2025.

·         China’s base oils imports typically rise strongly in first quarter of the year even with growing self-sufficiency of supply.

·         Planned plant maintenance in China starting in Q1 2025 likely to add to requirements for top-up volumes from overseas markets.

·         Taiwan’s muted base oils export volumes to China so far in Jan-Feb 2025 suggest that domestic buyers are covering additional requirements with supplies from other sources, or that demand is weak, curbing need for large volume of additional supplies.

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

·         Slowdown in shipments to southeast Asia suggests regional buyers are securing supplies from other sources or that they head into peak-demand period with lower stocks.

·         Slowdown in shipments to China mirrors similar trend for supplies from Taiwan.

·         China’s domestic Group II light-grade prices continue to edge lower vs Shandong diesel and vs FOB Asia prices.

·         Domestic Group I brightstock premium to FOB Asia price drifts lower after spiking in H2 Jan 2025.

·         Weakening price differentials suggest seasonal pick-up in China’s demand remains more muted than usual, even for products for which it remains more reliant on supplies from overseas markets.

·         Thailand blender PSP Specialties’ share of country’s lube market and base oils imports surges in 2024.

·         Rising market share of Thailand’s largest independent lube blender could provide opportunities for overseas refiners seeking more outlets for their supplies.

·         India’s base oils demand could get support from sustained rise in country’s lube consumption that extends through Jan 2025.

·         Rising lube demand consumes growing volumes of base oils supplies, keeping blenders’ stocks low and complicating moves to replenish inventories.

·         Lower inventories could leave blenders with tighter-than-usual supplies ahead of seasonal surge in demand in month of March.

·         Rising lube consumption likely to sustain blenders’ firm requirements for overseas base oils supplies until new domestic production capacity comes online.

·         Planned plant maintenance work in India in Q1 2025 likely adds to blenders’ reliance on overseas supplies.

·         India’s base oils demand for overseas supplies showed signs of pausing in early-2025 as wave of arbitrage shipments from US reached the country.

·         Signs of pause in demand for overseas supplies could reflect expectations of additional flow of arbitrage shipments from US to India early this year.

·         Volume of any additional arbitrage shipments from US in coming months likely to be lower than at start of 2025.

·         Slowdown in arbitrage shipments would put pressure on buyers to target supplies from other sources instead.

·         Any such pick-up in requirements from other sources could put pressure on imported cargo prices to adjust accordingly  to boost attraction of moving more shipments to India.

·         India’s imported Group II cargo price premium to FOB NE Asia prices duly recovers in Feb 2025 after narrowing in Jan 2025.

·         CFR India premium vs FOB NE Asia and US export prices remains much lower than year-earlier levels, complicating line-up and volume of any additional shipments to India.

·         Lining up additional supplies could also be more challenging at a time when plant-maintenance work in Asia cuts surplus supply.

·         Pakistan’s three largest base oils importers account for more than 75% of country’s total imports in 2024.

·         Large share magnifies importance of those importers’ procurement plans.

·         Change in those importers’ shipments triggers marked change in flows from different sources.

·         Change in trade flows suggest supplies from South Korea see largest impact from rise in shipments from US to Pakistan.