Asia base oils - week of May 15: Demand outlook

·        China’s post-Covid lockdown economic recovery continues to lag expectations.

·        China’s April automobile sales surge 83pc year on year, fall from March and stay lower than April 2021 levels.

·        China’s April alternative-fuel vehicle sales account for more than 33pc of country’s total car sales.

·        Slowdown in Chinese demand for bright stock follows surge in Thailand’s Q1 exports to the country to the highest Q1 volume since 2016.

·        China’s weak domestic base oils prices relative to regional cargo prices point to still-muted demand and sufficient domestic supply.

·        Economic growth in southeast Asia shows signs of steadying at lower pace than last year.

·        Firm lube demand in Japan and Thailand outpaces rising supplies in March, cutting surplus availability in both countries heading into the second quarter of the year.

·        Total Asia-Pacific supply in March still outpaces regional demand.

·        Regional buyers remain confident they can secure supplies even with rise in plant maintenance work during Q2 2023.

·        Lack of concern about supply removes a key driver behind stronger demand.

·        High base oil price relative to diesel raises expectations of price correction, eroding another driver behind stronger demand.

·        Seasonal rise in southeast Asia’s lube demand in March lags year-earlier levels, ahead of typical slowdown in consumption during Q2 2023.

·        Slowdown in lube demand from year-earlier levels contrasts with rising regional base oils supply from year-earlier levels.

·        Trend leaves blenders with healthy stocks in Q2 2023.

·        Trend increases need for recovery in China to balance out slower demand in southeast Asia.

·        Trend increases need for regional refiners to target more distant markets, like last year.

·        Indonesia’s Q1 base oils imports hold firm – but Singapore accounts for growing share of its overseas requirements amid dip in supplies from South Korea.

·        Extension of that trend into Q2 2023 could trigger slowdown in shipments as supplies from Singapore fall.

·        Indian buyers likely to resist further rise in base oils prices amid healthy availability, slowdown in Asia-Pacific demand and lower crude/gasoil prices.

·        India’s April passenger car sales fall for first time in nine months.

·        India’s car buyers brought forward purchases ahead of price-increases from April, when new vehicles had to include devices that monitored emissions in real time.

·        India’s slowdown in Q2 lube consumption vs Q1 curbs further blenders’ requirement for overseas supplies.

·        More muted demand gives blenders more flexibility to turn down offers of supplies at prices they deem to be too high.

·        Indian buyers could face dilemma of targeting lower prices in view of fall in diesel prices while taking delivery of US supplies procured at higher prices.

·        Pakistan’s base oils demand likely to continue to fall in face of sliding lube consumption.