Asia base oils demand outlook: Week of 3 March

·         Asia’s base oils demand could be more muted than usual even with market fundamentals likely to tighten over coming weeks.

·         Less feasible arbitrage to markets like China and India coincides with time of year when demand typically gets seasonal boost.

·         Less feasible arbitrage could suggest buyers are comfortable with existing stocks.

·         Less feasible arbitrage could reflect fall in feedstock prices in recent weeks, raising buyers’ concern about adjustment in base oils prices to reflect those lower costs.

·         Less feasible arbitrage could leave buyers with tight supplies if demand exceeds expectations at a time when surplus supply is set to tighten.

·         China’s demand shows signs of staying more muted than usual at a time of year when spring oil-change season usually triggers stronger buying interest.

·         China’s Group II light and especially heavy-neutrals base oils prices extend fall versus FOB Asia cargo prices.

·         Narrower premium to FOB Asia prices points to more muted domestic demand, cuts incentive for regional refiners to boost shipment volumes to China.

·         Shipments from Taiwan to China in Feb 2025 show little signs of major increase, reflecting less attractive arbitrage.

·         Narrower premium to FOB Asia prices includes products for which China remains structurally shorter such as Group II heavy grades.

·         Less feasible arbitrage points to sufficient domestic supply even ahead of major plant maintenance in China in coming weeks.

·         Less feasible arbitrage could reflect domestic buyers’ preference to maintain lower stocks than usual for time of year amid uncertainty about economic outlook.

·         Singapore’s base oils exports to southeast Asia over last four weeks extend rebound to highest level since mid-2024.

·         Surge in shipments enables buyers to replenish stocks ahead of seasonal rise in demand later in Q1 2025.

·         Tighter availability of spot supplies likely boosts buyers’ demand for maximum volume of term supplies from sources like Singapore.

·         Ongoing slide in Japan’s base oils exports to southeast Asia in Jan 2025 sustains stronger demand from Asia’s remaining sources of Group I base oils, like Singapore.

·         Singapore’s exports to China stay higher over last four weeks and at similar level to same time a year earlier.

·         Exports hold steady at higher levels even amid signs of more muted demand in China.

·         Singapore’s base oils exports to India stay much higher over last four weeks than in Feb 2024.

·         India’s base oils demand could get support from blenders’ lower inventories after supply lags demand in Jan 2025 for second month.

·         Buyers face additional challenge of likely drop in surplus supply from overseas sources because of plant maintenance work and rising domestic demand in those overseas markets.

·         India’s imported cargo price for Group II base oils maintains relatively low premium to FOB Asia cargo prices.

·         Low premium and marginal arbitrage suggest that buyers have sufficient supplies to meet demand.

·         India’s imports from Taiwan show signs of staying at elevated levels in Feb 2025 even with low CFR India price premium to FOB Asia prices.

·         India's imports from UAE show signs of climbing to higher-than-usual levels in Feb 2025.

·         Low premium to FOB Asia prices could reflect recent fall in feedstock prices, curbing expectations of upward pressure on base oils prices.

·         Low premium could reflect concern that any additional arbitrage shipments would only reach India in Q2 2025.

·         Domestic demand typically falls at start of second quarter of the year, after surge in consumption in month of March.

·         Buyers would still face pressure to procure supplies to replenish depleted stocks.

·         Low premium could reflect buyers’ preference to maintain leaner stocks for now amid expectations that there will be sufficient supply to replenish depleted stocks.

·         India’s discount of CFR N70 cargo price to domestic diesel price falls in Feb 2025 to lowest since Aug 2024.

·         Wider N70 discount to diesel often coincides with firmer demand for very-light grade base oils.

·         Any further narrowing of N70 discount could trigger slowdown in demand for very-light grade base oils.