Asia base oils demand outlook: Week of 30 June

·         Asia’s base oils demand could ease as lower crude oil prices curb prospect of refiners adjusting output or raising prices.

·         Prospect of seasonal slowdown in consumption and rise in surplus supply in coming weeks adds to incentive to hold back and to procure top-up supplies on need-to basis.

·         Demand for Group II heavy grades could get support from concern about tighter availability of Group I heavy neutrals because of upcoming plant-maintenance in southeast Asia and uncertainty about stability of flows from Iran.

·         China’s base oils demand shows signs of holding firmer for heavy grades than light grades.

·         China’s domestic Group II heavy-grade price premium to FOB Asia N500 cargo price rises to highest since start of 2025.

·         Higher premium makes arbitrage more feasible.

·         China’s Group II N500 price also rebounds vs Group II light grades, vs Group I heavy neutrals and vs domestic diesel prices.

·         Any extension of sudden outperformance of China’s Group II heavy-neutrals price could point to change in supply-demand fundamentals that support firmer market dynamics.

·         Any such pick-up in supply-demand fundamentals would be at a time of year when demand usually faces a seasonal slowdown.

·         China’s base oils demand already falls in May 2025 from year earlier for sixth time in seven months to close to lowest since Aug 2024.

·         Shrinking demand from year-earlier levels would magnify likely seasonal slowdown in consumption in third quarter of the year.

·         Lower demand, and likely pick-up in domestic base oils production following round of plant-maintenance work, could sustain downward pressure on requirements for supplies from overseas markets.

·         Recent rise in domestic Group II N500 price premium conversely supports pick-up in requirements from overseas markets.

·         Demand in southeast Asia could be more muted ahead of typical seasonal slowdown in lube demand and expected pick-up in supplies of premium-grade base oils.

·         Demand in southeast Asia for supplies outside the region could face even more pressure amid rise in Singapore’s base oils exports to southeast Asia in recent weeks.

·         Rise in exports, and any slowdown in demand, would leave shipments from Singapore covering larger share of blenders’ requirements.

·         India’s CFR Group II light-grade price-premium to FOB Asia N150 cargo price recovers; heavy-grade premium holds firm.

·         Firm CFR Group II price-premiums through Q2 2025 contrast with slump in price-premium in Q2 2024, point to stronger supply-demand fundamentals this year.

·         Firm CFR Group II price-premiums to FOB Asia prices point to ongoing buying interest in additional supplies even as more plant-maintenance in Asia draws to a close.

·         Firm CFR Group II price premiums coincide with larger-than-usual base oils imports in recent months.

·         South Korea’s base oils exports to India stay high in May 2025 for fourth month.

·         High exports from markets like South Korea and Singapore raise prospect of sustaining India’s base oils imports at more elevated levels in June 2025.

·         Demand could ease in coming weeks for supplies from sources with shorter shipment time, like southeast Asia and Middle East, as consumption slows during monsoon season.

·         Demand could stay firmer for supplies from sources with longer shipment time, such as US, for cargoes that would reach India later in Q3 2025.

·         Demand typically rises around that time, when blenders start to build stocks ahead of festival season.

·         Firm CFR India Group II heavy-grade price-premium to FOB Asia cargo prices could also point to additional buying interest in Group II supplies in response to concern about disruption to base oils exports from Iran.

·         India’s Group I heavy-grade imports already fall to five-month low in May 2025, when plant-maintenance in Iran curbs flows from Middle East.

·         Drop in Group I supplies forces buyers to cover more heavy-grade requirements with Group II base oils, despite their steep price-premium to Group I base oils.

·         Dynamic leaves Group II heavy grades accounting for unusually large share of India’s heavy-grade imports in May 2025.

·         Any extension of that trend could cushion impact of seasonal slowdown in demand at start of Q3 2025.