Asia base oils - week of Sep 18: Demand outlook

Asia base oils - week of Sep 18: Demand outlook

·        Asia’s base oils demand likely to get support from signs of tighter supply and rising prices.

·        Asia’s more muted lubricants consumption likely to complicate blenders’ procurement plans as they seek to manage inventories carefully.

·        China’s base oils demand shows signs of staying weaker than usual; southeast Asia’s demand likely to hold steady; India’s demand for Asia supplies could rise amid slowdown in arb shipments from other markets.

·        China’s base oils demand likely to stay relatively muted even as peak seasonal demand period approaches.

·        Prospect of pick-up in China’s domestic base oils production in September gives blenders the leverage to continue to procure supplies as and when required.

·        Surge in Taiwan’s base oils exports to China in August point to blenders’ and distributors’ moves to replenish stocks ahead of seasonal pick-up in demand.

Exports to China rebound
Exports to China reboundCustoms Administration

·        Trend continues at slower pace in September amid drop in shipments from Taiwan and amid less feasible arbitrage to China.

·        Taiwan's base oils exports slow down in September ahead of plant shutdown in October.

·        Trend also suggests either China’s domestic supply is sufficient to cover more requirements, or that domestic blenders face weaker-than-usual seasonal rise in demand.

·        China’s base oils supply surplus over India’s base oils supply falls in July to narrowest in years.

China's surplus narrows
China's surplus narrows

·        China’s excess base oils supply and demand over India likely to continue to narrow in face of rising production and demand in India.

·        Philippines’ July base oils/lube imports fall at fastest pace in more than two years.

Demand slides
Demand slidesPhilippine Statistics Authority

·        Fall in shipments adds to signs of more widespread slowdown in demand in southeast Asia.

·        Philippines’ falling imports from Singapore and rising shipments from South Korea extend trend of diverging flows from those two suppliers in different markets.

·        Southeast Asia’s July lube demand falls for fourth time in five months, reflecting slowdown in markets like Philippines.

Demand extends fall
Demand extends fall

·        Lower consumption contrasts with stronger demand last year and appears to curb region’s ability to balance out slower demand in China.

·        But region’s outright lube consumption this year remains much higher than in first seven months of 2021, reflecting its increasingly instrumental role in Asia market.

·        India’s August lube demand rises to five-month high, reverses slower consumption in early 2023.

Demand holds firm
Demand holds firmMinistry of Petroleum and Natural Gas

·        Firmer demand consumes more base oils feedstock supplies and curbs blenders’ ability to build stocks ahead of typical seasonal rise in consumption from end of Q3 2023.

·        Trend likely to support sustained demand from blenders for additional base oils supplies.

·        India’s stronger lube consumption contrasts with slide in base oils imports to seven-month low in August.

Imports dip
Imports dipCustoms data

·        Imports likely to revive following restart of key base oils plant in South Korea after maintenance work.

·        But imports likely to get smaller boost from arbitrage shipments amid slowdown in flows from US and Taiwan.

·        India’s imports of Group II base oils stay unusually high in July and August, reflecting more limited impact of South Korea’s plant maintenance work on Group II supplies.

Group II imports stay high
Group II imports stay highCustoms data

·        Prospect of fall in Group II shipments from US and Taiwan likely to trigger drop in India’s total Group II imports.

·        Fall in arbitrage flows likely to give more regular suppliers more leverage over prices.

·        Pakistan’s July lube demand rises for first time in five months amid signs of steadier economic activity.

Demand improves
Demand improvesOCAC

·        Any revival in Pakistan’s lube consumption would likely boost base oils demand from overseas sources, especially South Korea and Singapore.

Asia base oils - week of Sep 18: Demand outlook
Global base oils - week of Sep 18: Price outlook - arbitrage

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