Asia base oils demand outlook: Week of 26 May

·         Asia’s base oils demand likely to weaken in face of seasonal slowdown in consumption and rise in supply.

·         Drop in lube demand likely to gather pace from start of Q3 2025.

·         Drop in demand could be larger than usual because of weaker-than-expected economic growth.

·         Expectations of lower demand and improving supply coincide with firm base oils margins that reflect tighter supply-demand fundamentals.

·         Concern about any adjustment in prices to reflect change in supply-demand fundamentals could add to preference to hold back.

·         FOB Asia Group II N500 price-premium to Group I SN 500 falls to narrowest in six months.

·         Narrowing premium points to changing supply-demand fundamentals for the two grades.

·         Narrowing premium follows sustained surge in Group II N500 price relative to gasoil and relative to other grades since summer 2024.

·         China’s base oils demand rises in April 2025 from year-earlier levels for first time in six months.

·         Higher demand contrasts with signs of weaker buying interest in other markets in Asia.

·         Higher demand, and firm industrial output growth, points to muted immediate impact of trade war with US.

·         China’s rising Group II base oils prices versus diesel and FOB Asia cargo prices so far in Q2 2025 already pointed to relatively firm supply-demand fundamentals.

·         Demand could get further support from temporary truce in China-US trade war.

·         Demand could still face pressure from uncertainty about US trade tariff policy in coming months.

·         Demand anyway faces seasonal slowdown from end of second quarter.

·         Demand for overseas supplies could face additional pressure following completion of most plant maintenance in China.

·         China’s firm Group II N150 premium to FOB Asia cargo prices has yet to reflect any such pressure. 

·         Dip in southeast Asia’s lube consumption at end-Q1 2025, slower-than-expected economic growth and seasonal slowdown in demand from end-Q2 2025 likely to limit buying interest in the region.

·         Even so, Singapore’s base oils exports to southeast Asia stay higher over last four weeks after fall in shipments during April 2025.

·         Any buying interest likely to remain restricted to procurement of term volumes and replenishment of low stocks after slowdown in demand in early-Q2 2025.

·         Singapore’s base oils exports to India by contrast fall sharply over last four weeks.

·         Drop in shipments could point to slowdown in buying interest in the country.

·         India’s CFR Group II N500 price premium to FOB Asia cargo price extends rise, holds firm vs US export price.

·         Unusual rise in Group II heavy-grade premium to FOB Asia cargo price, and ongoing strength of premium to US export price, contrasts with more typical dip in price premium around this time of year.

·         Rising price premium follows slump in India’s heavy-grade base oils imports to four-month low in April 2025.

·         Lower imports and domestic plant-maintenance work complicate blenders’ plans to replenish lower stocks.

·         Supply likely to improve in coming weeks following expected completion of most domestic and overseas plant maintenance.

·         India’s Group II light-grade premium to FOB Asia cargo price also rises in Q2 2025 despite surge in imports of light and very-light grade base oils in April 2025.

·         India’s light-grade price-strength points to other factors supporting light-grade prices.

·         India’s very-light-grade cargo price-discount to country’s domestic diesel price extends rise in May 2025 to highest this year.

·         Wide spread between domestic diesel price and imported light-grade cargo price often coincides with firmer demand for light-grade base oils.