Asia base oils – week of June 5: Demand outlook

·        China’s May purchasing managers’ indexes point to still-muted growth, adding to signs of slow economic recovery.

·        China’s weak economic recovery raises prospect of repeat of 2H 2022, when Asia refiners redirected base oils supplies to other markets.

·        Weaker demand in southeast Asia could complicate the strategy.

·        China’s May base oils demand shows signs of rising from year-earlier levels but holding well below pre-March 2022 levels despite removal of zero-Covid restrictions.

·        Thailand’s April base oils exports rise but include no shipments to China.

·        Trend suggests China’s demand weakness extends through Q2 2023.

·        Thailand’s April lube demand falls sharply, compounding seasonal slowdown in regional consumption.

·        Thailand’s April passenger car engine oil demand falls to lowest in almost three years.

·        Firmer PCMO consumption had previously cushioned slowdown in Thailand’s total lube consumption.

·        Thailand’s tourist arrivals stay much higher than 2022, flatline since start of 2023.

·        Extension of PCMO demand weakness would trigger steeper fall in total consumption.

·        Vietnam’s lube demand shows signs of slowing as April base oils imports fall for seventh month.

·        Southeast Asian markets more reliant on exports to drive growth show sharper slowdown in base oils requirements.

·        Slower demand in southeast Asia would compound impact of slower-than-expected demand in China.

·        Southeast Asia had partially cushioned the impact of China’s slower demand last year.

·        Singapore’s weekly base oils exports slump in last week of May to lowest in more than a year, keeping monthly exports low.

·        Singapore unusually exports almost no base oils to China in last week of May, adding to signs of still-muted recovery in China’s demand.

·        Japan’s base oils demand likely to face more pressure from sustained slowdown in country’s lubricating oil consumption.

·        India’s base oils demand likely to stay muted as prospect of seasonal slowdown in demand, and slower demand in other markets in Asia-Pacific, curb urgency to secure additional supplies.

·        Signs of ready availability of surplus supplies in Asia/Mideast Gulf/US give buyers option of securing additional supplies as and when required.