Asia base oils demand outlook: Week of 31 March

·         Asia’s base oils demand could hold firm over the coming weeks as buyers replenish low stocks and lube consumption holds steady.

·         Rising crude oil prices could provide additional support.

·         Seasonal slowdown in demand from end of second quarter typically starts to curb buying interest several weeks before then.

·         High base oils prices, as well as uncertainty about extent and impact of US tariffs, incentivize buyers to procure sufficient supplies but avoid moves to build larger stocks.

·         China’s base oils demand could get support from ongoing plant maintenance in the country.

·         Any such support could be temporary amid signs of structural drop in demand.

·         China’s base oils demand falls by 10% in first two months of 2025, after rising in 2024.

·         Shrinking demand would compound drop in requirements for supplies from overseas markets.

·         Arbitrage to import additional Group II supplies from Asia stays hard to work even during round of plant maintenance, reflecting that dynamic.

·         Any extension of fall in China’s demand would extend pressure to country’s domestic refiners.

·         Any extension of fall in demand would increase attraction for domestic refiners and blenders to boost exports.

·         China’s lube exports rise in first two months of 2025, extending surge in shipments during previous five years.

·         Rising lube exports could partially cushion impact of shrinking domestic demand.

·         Rising lube exports could increase competition in overseas markets, curbing base oils requirements in those markets.

·         China’s Group I base oils prices strengthen vs Group II base oils and vs FOB Asia cargo prices, especially for heavy grades.

·         Group I price-strength suggests China’s plant maintenance has larger impact on Group I supply-demand fundamentals than on Group II fundamentals.

·         Singapore’s base oils exports to China, India, and southeast Asia stay higher than usual in March 2025 for second month.

·         High exports partially balance out impact of drop in shipments from Taiwan and plant maintenance work throughout Asia-Pacific region in March 2025.

·         Exports likely to need to stay at more elevated levels to cushion impact of extension of plant maintenance work into Q2 2025.

·         Extension of maintenance work could support firm demand for supplies from Singapore as blenders seek to replenish depleted stocks.

·         India’s base oils demand for overseas shipments likely to get support to cover for lower domestic supply over coming months as plant maintenance cuts output.

·         Tighter domestic supply would complicate blenders’ plans to replenish depleted stocks following peak-demand season in month of March.

·         Blenders’ stocks were already likely lower than usual before peak-demand season amid tighter supply-demand balance in early 2025.

·         Dynamic could support firm demand for overseas supplies even with likely seasonal slowdown in lube consumption at start of Q2 2025. 

·         Demand could focus more on very-light grade base oils, whose imports slumped in Feb 2025, rather than heavy-grade base oils, whose imports surged in Feb 2025.

·         India’s imported Group II heavy-grade cargo price premium to FOB Asia and US export prices widens in March 2025.

·         Wider premium points to ongoing buying interest in heavy grades despite surge in imports in Feb 2025.