Asia base oils - week of Oct 30: Demand outlook

·        Asia’s base oils demand likely to remain mixed, with muted buying interest in China and steady demand from India.

·        India’s more competitive prices versus China likely to continue to attract more supplies to that market.

·        India’s demand for very-light grades could ease in anticipation of pick-up in availability of supply in coming weeks.

·        Asia’s lube demand likely to rise in Q4 2023 from Q3 2023, and even more strongly in Q1 2024.

·        Seasonal and economic boost likely to lift lube demand over coming months.

·        Firmer demand would absorb more regional base oils supplies, curbing size of surplus and volumes available for other regions.

·        China’s September base oils demand rises to three-month high amid signs of stock-building ahead of expected seasonal pick-up in lube demand from end-Q3 2023.

·        China’s September base oils imports also rise to three-month high, adding to signs of stock-building.

·        Chinese blenders’ ongoing caution suggests stock-building may reflect moves to cover for drop in supplies from Taiwan in Q4 2023 rather than expectations of recovery in demand.

·        Signs of still-muted domestic lube demand raise prospect of slowdown in China’s requirements for overseas supplies as buyers focus on working down existing stocks first.

·        China’s September base oils exports fall to fourteen-month low, adding to signs of seasonal pick-up in domestic demand.

·        China’s exports to Singapore show signs of rising in October.       

·        Any resumption of larger flows of exports from China would add to signs of weak lube demand, resulting in excess base oils supply.

·        Singapore’s September base oils exports fall to five-month low as shipments to China fall to lowest in more than six years.

·        Fall in shipments to China add to signs that any rise in country's lube demand remains muted, and blenders and distributors are consuming stocks relatively slowly.

·        Trend suggests China's demand for regional base oils supplies likely to stay muted, and Asia refiners should plan accordingly.  

·        Singapore’s September exports to India by contrast rise to highest in more than four years.

·        Trend highlights contrast with China and taps seasonal rise in India’s demand over coming months.

·        Trend reflects India’s increased reliance on supplies from Asia over coming months following pause in arbitrage shipments from US.

·        India’s demand for very-light-grade base oils likely to be restricted to supplies for production of finished lubricants.

·        India’s increasingly narrow domestic retail diesel premium to imported base oil cargo prices likely to dampen demand for base oils for other uses.

·        India’s more muted demand could complicate any moves to seek to ship surplus light-grade supplies from US to the country unless prices adjust to make the arbitrage workable again.

·        Pakistan’s base oils demand could rise after supplies fall in August while lube demand rises.

·        Lower supply and higher demand cut stocks, boosting need to replenish inventories.

·        Demand could get further support if lube consumption extends its recovery.

·        Shipments from South Korea and Singapore to Pakistan rebound in September; supplies would help to meet recent pick-up in demand.