Asia base oils - week of Dec 11: Demand outlook

·        Asia’s base oils demand likely to soften as improving availability and falling feedstock prices incentivize buyers to hold back.

·        China’s demand shows more mixed signals; India’s demand could ease as rising supply gives buyers leverage to hold off locking in requirements.

·        China’s domestic Group II price premium to fob Asia prices stays low even as it extends gradual rise.

·        Trend points to sufficient domestic supply to meet demand.

·        China’s domestic bright stock price holds firm versus fob Asia levels, sustaining feasibility of arbitrage flows.

·        Singapore’s weekly base oils exports to China stay higher than usual, pointing to firmer domestic demand or rise in the country’s stocks.

·        Rising exports coincide with ongoing slowdown in Singapore’s base oil imports from China in recent weeks.

·        Drop in shipments to Singapore coincides with rise in China’s base oils output in Nov 2023.

·        Rising domestic output and drop in shipments to Singapore point to round of stock-building or firmer domestic consumption.  

·        Thailand’s October lube demand rises for third month after eleven-month slide.

·        Reviving demand adds to signs of firm consumption in key markets in southeast Asia.

·        Growing demand highlights importance of the region for Asia-Pacific refiners and importance of boosting market share in the region.

·        Region’s firmer demand would still be insufficient to absorb likely rise in Asia’s base oils supply over coming weeks.

·        Indonesia’s October base oils imports rise to highest in more than four years on sustained surge in shipments from Singapore.

·        Rise in supplies from Singapore contrasts with slump in flows from South Korea.

·        Trend boosts Singapore’s share of Indonesia’s base oils imports to 70pc of the total in first ten months of 2023, up from 56pc in 2022.

·        Singapore’s rising share of growing market provides valuable outlet to counter more mixed demand in other key outlets like China and India.

·        Trend increases pressure on South Korean refiners to boost shipments to other markets.

·        India’s firm domestic lube consumption in Q4 2023 boosts its base oils requirements.

·        Growing signs of healthy availability from different sources and lower prices incentivize Indian buyers to hold back for now.

·        Singapore’s base oils exports to India stay lower than usual in recent weeks.

·        Most recent slowdown in Singapore’s exports to India was in Q2 2023, when wave of arbitrage shipments from US moved to India.

·        Slowdown in shipments this time shows signs of repeating that pattern as more arbitrage shipments from US move to India.

·        Slowdown in shipments from Singapore and South Korea to India in Q2 2023 balanced out rise in supplies from US.

·        Slowdown in shipments from Singapore this time could have smaller impact amid higher exports from South Korea to India.

·        India’s retail diesel price premium to cfr India N70 prices widens in Dec 2023 to widest in four months.

·        Widening diesel premium to light-grade base oils prices often coincides with firmer demand for light-grade base oils.