Asia base oils – week of July 3: Demand outlook

·        China’s base oils demand faces seasonal slowdown over coming weeks.

·        Trend would compound impact of weaker-than-expected revival in country’s economic activity.

·        China’s June car sales likely rise from May, steady vs year-earlier amid pick-up in sales in 2H June.

·        China’s May base oils demand stays more than 25pc below May 2021 levels, cutting requirements for supplies from regional producers.

·        China's slower-than-expected recovery in demand, prospect of rising domestic supply, and expectations of further downward price pressure likely to sustain muted buying interest in overseas supplies into the coming months.

·        Singapore’s unusually high base oils imports from Taiwan in May, and lower-than-usual imports from China, add to signs of weaker Chinese demand for regional supplies and rising consumption of domestic supplies.

·        Singapore’s base oils exports to India rebound throughout June; shipments to China stall, slipping to their lowest since the first two months of the year.

·        Trend adds to signs that China’s muted demand for overseas supplies set to extend into Q3 2023.

·        Trend boosts incentive for Asia refiners to target other markets instead.

·        Singapore’s May base oils exports to SE Asia surge, contrasting with lower volumes to China and India.

·        Trend adds to signs of more muted Chinese demand and boosts incentive to diversify away from that market.

·        Singapore’s growing focus on southeast Asia market coincides with rising demand and scant new production capacity in the region.

·        Singapore’s waning focus on China coincides with slower demand and surge in domestic base oils production capacity in that market.

·        Prospect of rise in India’s base oils production capacity adds to attraction for Singapore to focus more on southeast Asia.

·        Vietnam’s May base oils imports rise to eleven-month high, pointing to improvement in demand in southeast Asia.

·        Recent prospect of weak demand in southeast Asia and simultaneously in China would have added to complications for regional refiners to find outlets for surplus supplies.

·        Australia’s industrial lube demand stays unusually strong in early Q2 2023, while engine oils consumption slides.

·        Trend contrasts with other markets in southeast and northeast Asia, boosts attraction of targeting country with base oils used for industrial oils production.