Asia base oils - week of Nov 20: Demand outlook

·        Asia’s base oils demand likely to get support from steady-to-firm lube consumption in southeast Asia/India, signs of steadier demand in China.

·        China’s domestic Group II base oils prices hold firm versus diesel values, even in face of rising domestic supply and lower feedstock prices.

·        China’s domestic bright stock prices hold firm vs fob Asia prices, even if down from recent highs at end-Oct 2023.

·        Restart of several base oils units in China in Nov 2023 could increase surplus supplies in the country, putting downward pressure on prices.

·        Move to restart base oil units could reflect/cover for impact of slowdown in shipments from Taiwan to China in Q4 2023.

·        Move could reflect expectations/signs of pick-up in demand.

·        Prospect of rise in supplies coincides with slowdown in Singapore’s base oils imports from China in 1H Nov 2023, contrasting with surge in supplies in Oct 2023.

·        Slowdown in shipments could reflect temporarily tighter supplies, or signs of pick-up in domestic demand.

·        South Korea’s higher exports to China in Oct 2023 add to signs of firmer demand.

·        Move could reflect pick-up in end-user consumption or to cover for drop in supplies from Taiwan.

·        Moves to replenish stocks would be unusual at a time when base oils prices face downward pressure from lower feedstock costs.

·        Asia’s September lube demand rises for fifth month on sustained rise in consumption throughout the region.

·        Stronger-than-expected demand absorbs more of the region’s base oils supplies.

·        Strong demand cuts size of region’s base oils surplus, curbs need for adjustment in regional prices to make feasible the arbitrage to more distant markets.

·        Smaller surplus contrasts with wave of arbitrage shipments from Asia to other markets in 2H 2022.

·        Singapore’s base oils exports to southeast Asia hold relatively firm in month to mid-Nov 2023, especially versus flows to China and India.

·        Steady flows point to firm regional demand.

·        Steady flows could also point to Singapore’s rising share of southeast Asia’s base oils requirements.

·        Trend helps to counter weaker demand from China and possibility of drop in demand from India when domestic supply rises in that market.

·        Singapore’s base oils exports to India stay lower than usual in month to mid-Nov 2023.

·        Slowdown in exports could reflect signs of large rise in shipments from South Korea to India in recent weeks.

·        India’s Group II base oils imports stay unusually high in Oct 2023.

·        Persistently-high volumes point to firm domestic demand.

·        Most of the supplies originate from Asia in face of waning arbitrage flows from US.

·        Trend could complicate any subsequent arbitrage shipments from US unless prices are competitive.

·        India’s demand for overseas supplies of light-grade N70 base oils holds steady.

·        India’s imports of N70 recover in Oct 2023 to more typical levels after slump in supplies in Sept 2023.

·        Origin of the supplies changes, with surge in flows from Saudi Arabia and extended drop in shipments from South Korea.

·        India’s imports of light-grade N60 base oils extend fall in Oct 2023 and throughout the year.

·        Slide in India’s imports of very-light grade base oils since early 2022 reflects more the fall in shipments of N60 supplies.

·        Demand for N60 likely to stay muted even as premium of India’s domestic retail diesel price rises in Nov 2023 versus imported very-light grade prices.

·        Diesel premium to imported very-light grade prices stays lower than in Jan-Aug 2023.