· Asia’s base oils demand could get unexpected support from China on tax changes, and from any signs of lower-than-expected regional supply.· China’s stalling revival in base oils output in June fails to trigger pick-up in imports..· Trend suggests that still-low base oils supply levels remain sufficient to cover domestic demand.· Trend suggests that Asia refiners fail to derive any benefit from China’s still-low base oils output.· Such a scenario raises prospect of repeat of 2H 2022, when regional refiners redirected large volumes to other markets.· Trend suggests that China’s demand for overseas supplies could fall further if domestic output rises any further or domestic demand fails to revive.· Domestic demand likely to remain muted at least through July.· Changes in China’s consumption tax on white oils reduce competitiveness of domestic white oils vs base oils prices.· Changes in consumption tax could trigger rise in base oils consumption even amid weak outright demand.· Changes in consumption tax could have impact well beyond China’s domestic market.· Japan’s lube demand shows signs of recovery in Q2 2023, mirroring improvement in economic growth and automobile sales/production. Recovery expected to extend into Q3 2023..· Japan likely to see growing changes in its base oils imports and export flows over coming months. · Firmer domestic demand in Japan likely to boost requirements for premium grades, while lower base oils output cuts export volumes.· Thailand’s May lube demand extends fall, especially for industry-related lubricants..· Trend raises prospect of further weakness in lube demand in southeast Asia, contrasts with signs of firmer buying interest in other markets in the region.· An extension of southeast Asia’s slowdown in lube demand into 2H 2023 would complicate regional refiners’ options for clearing surplus volumes unless Chinese demand revives.· India’s June automobile sales rise year on year, fall from May, with outlook mixed as erratic monsoon rainfall raises uncertainty about strength of rural market..· India’s June base oils imports show signs of holding at similar levels to May, boosted by wave of arbitrage flows from sources like US, Thailand, and China.· Arbitrage shipments show signs of cutting Indian buyers’ demand for supplies from South Korea.· More arbitrage supplies from US and Taiwan set to reach India in July.· Prospect of weaker-than-expected Chinese demand would sustain refiners’ interest in moving surplus supplies to India, curbing any urgency to buy.· Indian buyers likely to eye cargoes for loading in August and delivery in September. Timing would coincide with end of the monsoon season and precede festival season in Q4 2023.· India’s widening retail diesel premium to very-light grade base oils prices could spur firmer interest in the supplies, especially if buyers deem prices to have bottomed out..Global base oils - week of July 10: Price outlook - margins
· Asia’s base oils demand could get unexpected support from China on tax changes, and from any signs of lower-than-expected regional supply.· China’s stalling revival in base oils output in June fails to trigger pick-up in imports..· Trend suggests that still-low base oils supply levels remain sufficient to cover domestic demand.· Trend suggests that Asia refiners fail to derive any benefit from China’s still-low base oils output.· Such a scenario raises prospect of repeat of 2H 2022, when regional refiners redirected large volumes to other markets.· Trend suggests that China’s demand for overseas supplies could fall further if domestic output rises any further or domestic demand fails to revive.· Domestic demand likely to remain muted at least through July.· Changes in China’s consumption tax on white oils reduce competitiveness of domestic white oils vs base oils prices.· Changes in consumption tax could trigger rise in base oils consumption even amid weak outright demand.· Changes in consumption tax could have impact well beyond China’s domestic market.· Japan’s lube demand shows signs of recovery in Q2 2023, mirroring improvement in economic growth and automobile sales/production. Recovery expected to extend into Q3 2023..· Japan likely to see growing changes in its base oils imports and export flows over coming months. · Firmer domestic demand in Japan likely to boost requirements for premium grades, while lower base oils output cuts export volumes.· Thailand’s May lube demand extends fall, especially for industry-related lubricants..· Trend raises prospect of further weakness in lube demand in southeast Asia, contrasts with signs of firmer buying interest in other markets in the region.· An extension of southeast Asia’s slowdown in lube demand into 2H 2023 would complicate regional refiners’ options for clearing surplus volumes unless Chinese demand revives.· India’s June automobile sales rise year on year, fall from May, with outlook mixed as erratic monsoon rainfall raises uncertainty about strength of rural market..· India’s June base oils imports show signs of holding at similar levels to May, boosted by wave of arbitrage flows from sources like US, Thailand, and China.· Arbitrage shipments show signs of cutting Indian buyers’ demand for supplies from South Korea.· More arbitrage supplies from US and Taiwan set to reach India in July.· Prospect of weaker-than-expected Chinese demand would sustain refiners’ interest in moving surplus supplies to India, curbing any urgency to buy.· Indian buyers likely to eye cargoes for loading in August and delivery in September. Timing would coincide with end of the monsoon season and precede festival season in Q4 2023.· India’s widening retail diesel premium to very-light grade base oils prices could spur firmer interest in the supplies, especially if buyers deem prices to have bottomed out..Global base oils - week of July 10: Price outlook - margins
