Asia base oils demand outlook: Week of 28 April

·         Asia’s base oils demand could wane as expectations of improving supply and more muted end-user consumption incentivize blenders to keep low stocks.

·         High base oils margins could add to buyers’ preference to hold back amid concern about disconnect between high margins and prospect of weaker supply-demand fundamentals.

·         More muted regional demand would speed up recovery in supply as more plant maintenance draws to a close in coming weeks.

·         More muted regional demand and rising supply would increase need to boost buying interest in more distant markets.

·         Typical seasonal slowdown in China’s base oils demand from end-Q2 could start earlier and more rapidly than usual this year.

·         Demand got support in recent months from heavy round of domestic plant maintenance work.

·         Completion of plant maintenance work in coming weeks would remove that support.

·         China’s domestic Group II base oils prices point to still-firm fundamentals despite prospect of weaker demand and improving supply.

·         China’s domestic Group II N150 premium to FOB Asia cargo price stays relatively firm, contrasts with slump in premium from April 2024.

·         China’s Group II N500 premium to FOB Asia cargo price holds steadier after trending lower this year, but remains much higher than year-earlier levels.

·         Firm premiums follow rise in China’s base oils demand to one-year high in March 2025.

·         Higher demand likely reflects stock-building in preparation for plant maintenance more than for seasonal pick-up in consumption.

·         China’s base oils demand falls in Q1 2025 yoy for first time in two years.

·         Demand falls even before China and US’ imposition of steeper tariffs on each other at start of Q2 2025.

·         Demand likely to face further pressure in Q2 2025 following imposition of the tariffs.

·         Any such slowdown would add to signs of already-weaker demand in southeast Asia.

·         Singapore’s base oils exports to southeast Asia stay unusually low over past four weeks.

·         Exports stay low even after seasonal rise in demand at end-Q1 2025 leaves blenders with low stocks.

·         Lower-than-usual exports to southeast Asia and blenders’ lack of urgency to buy suggest they are more comfortable maintaining lower stocks.

·         Likely seasonal slowdown in lube consumption from end-Q2 2025 would prolong blenders’ more muted buying interest.

·         Any tariff-related economic slowdown would compound dip in lube consumption, adding to attraction of keeping low stocks.

·         India’s base oils demand shows more mixed signals.

·         Demand could ease as buyers focus on consuming existing stocks procured when crude oil prices were higher and supply-demand fundamentals were tighter.

·         Import volumes in April 2025 show signs of holding firm, with pick-up in shipments from US and Saudi Arabia, firm volumes from South Korea, and additional supplies from less regular sources like Turkmenistan.

·         Firm import volumes in March-April 2025 help to replenish buyers’ inventories that were depleted at end-Q1 2025.

·         Sufficient stocks give buyers leverage to hold back in anticipation of prices that start to reflect weakening supply-supply demand fundamentals in coming weeks.

·         Buying interest could focus more on supplies from Asia than from US amid expectations of more rapid pick-up in surplus availability in Asia than in US.

·         CFR India Group II heavy-grade premium to FOB Asia price extends rise at end-April 2025.

·         Widening Group II premium points to ongoing buying interest even with prospect of weakening supply-demand fundamentals.

·         Widening Group II premium suggests supply-demand fundamentals remain relatively firm for now.

·         Group II fundamentals could get support from tighter availability of Group I supply because of plant maintenance work in Middle East.   

·         Widening premium adds to attraction of focusing more on supplies from Asia.

·         CFR India Group II N70 price discount to India’s domestic retail diesel prices weakens to widest level this year.

·         Wider discount to retail diesel price typically boosts buying interest in very-light grade base oils.

·         Wide CFR India N70 premium to Singapore gasoil could conversely raise expectations of further drop in outright N70 price.