Asia base oils - week of Nov 27: Demand outlook

·        Asia’s base oils demand could stay firmer than usual for the time of year in face of relatively balanced supply-demand fundamentals.

·        More balanced fundamentals reduce prospect of sharp price adjustments in response to lower crude oil prices.

·        Expectations that prices could stay more rangebound curb buyers’ preference to hold back.

·        China’s base oils demand shows more mixed signals, but signs of improving following sharp slowdown at end Q3/early Q4 2023.

·        China’s domestic bright stock prices hold firm versus Asia and cfr India prices, pointing to firm demand for the product.

·        China’s domestic Group II light-grade premium to fob Asia prices stays low, insinuating sufficient domestic supply to cover demand.

·        China’s domestic Group II imported light-grade premium to fob Asia prices rises strongly, likely reflecting increasingly tight availability of supplies from Taiwan.

·        Singapore’s base oils exports to China hold steadier in recent weeks.

·        Trend points to firmer demand in China in recent weeks compared with end-Q3/start of Q4 2023.

·        China’s relatively firm domestic base oil prices vs domestic diesel prices add to signs of steadier demand in recent weeks.

·        Signs of steadier demand follow slump in China’s October base oils imports to lowest in more than six years, from six-month high in Sept 2023.

·        Slowdown suggests importers and blenders sought to hold off additional shipments as they prioritized maintaining low stocks at start of Q4 2023.

·        That preference, and drop in imports, suggests they were taking longer to consume supplies that they had procured in Q3 2023.

·        Slowdown in imports in Oct 2023 contrasts with rebound in South Korea and Singapore’s base oils exports to China in Oct 2023, and ongoing flow of supplies from Singapore to China in Nov 2023.

·        Trend suggests more of those supplies were set to reach China from Nov 2023, and point to a subsequent improvement in demand in recent weeks.

·        Even so, China’s long-term trend of slowing imports adds to need for regional refiners to target other markets instead.

·        China’s October base oils exports rise to second-highest level in fourteen months.

·        Rise in shipments cuts China’s net imports to lowest in more than six years.

·        Slump in supply and closed arbitrage to move Group II base oils to China suggest supply remains sufficient, adding to signs of muted demand.

·        Singapore’s October base oils imports from China rebound to second-highest level in more than six years.

·        Trend points to muted demand and plentiful surplus supply in China in Oct 2023.

·        Sharp slowdown in Singapore’s imports from China in 1H Nov 2023 could point improvement in China’s supply-demand dynamics.

·        Singapore’s base oils exports to China revert to more typical levels in Oct 2023.

·        Steady flows to China remain similar to last year, stay far below 2021 levels, when country was less impacted by lockdowns.

·        Steady flows at lower levels highlight China’s still-muted recovery in base oils demand even in 2H 2023.

·        Steady flows at lower levels highlight importance for regional refiners to focus on building other markets in place of China.

·        Singapore’s base oils exports to Indonesia hold firm in Nov 2023.

·        Singapore’s base oils exports to Indonesia exceed total shipments to other markets in SE Asia in Oct 2023 for third time in four months.

·        Trend highlights growing importance of Indonesian market for Singapore, especially amid uncertain demand prospects in China and India for overseas supplies.

·        Singapore’s base oils exports to India show signs of slowing in Nov 2023.

·        Trend follows high exports to India in Sept and Oct 2023.

·        Trend could point to Indian buyers’ preference to limit any stock-build in face of volatile crude oil prices and signs of plentiful availability.

·        Trend coincides with signs that pick-up in South Korean shipments to India is extending into Nov 2023.

·        Any such pick-up in supplies would add to Indian buyers’ preference to limit supplies from other sources to avoid large inventory-build.

·        India’s imports from South Korea so far in Nov 2023 already exceed total Oct 2023 volumes from the country, reflecting rise in supplies from that source.

·        India’s imports from US so far in Nov 2023 rise from total Oct 2023 volumes as Group II arbitrage supplies arrive.

·        India’s imported prices for Group I base oils continue to weaken versus fob Asia prices, ICIS data shows.

·        Trend could complicate shipment of additional Group I arbitrage shipments to India.

·        India’s October imports of Group III 4cst base oils extend rise, while imports of 8cst base oils extend fall.

·        Trend points to rising domestic consumption of Group III base oils for high-end lubricants.

·        Trend points to drop in demand for Group III 8cst base oils as low-priced alternative to other heavier-grade base oils.

·        Trend increases importance of India as key outlet for 4cst supplies, leaves suppliers eyeing other outlets for surplus 8cst supplies.