Asia base oils - week of Nov 6: Demand outlook

·        Asia’s base oils demand likely to be relatively firm amid signs of pick-up in consumption in southeast Asia, seasonal rise in demand in India.

·        China’s still-muted consumption likely to have smaller impact as Asia refiners target other markets.

·        Chinese blenders likely to continue to procure smaller volumes amid expectations of increasingly plentiful domestic supply and expectations that prices are more likely to fall than rise.

·        China’s rising domestic Group II price premium to diesel prices points to firmer demand or tighter supply.

·        China’s domestic Group II price premium to fob Asia prices stays unusually low, pointing to muted demand for overseas supplies.

·        China’s October domestic Group II base oils output falls to seven-month low.

·        Output falls despite slump in Taiwan’s base oils exports to China in October because of plant maintenance work.

·        Weak domestic base oils prices keep arbitrage shut, adding to pressure on supply.

·        Lack of any upward price-pressure points to slack demand for Group II base oils.

·        Rise in China's base oils supply in September, and need to clear those stocks, could add to pressure on demand.

·        Singapore’s base oils imports from China surge in four weeks to 1 November to highest in more than a year.

·        Rise in shipments points to plentiful surplus supply in China.

·        Plentiful surplus supply in China reflects weak demand and low prices, boosting attraction of exports.

·        Japan’s September base oils/lube demand rises to one-year high on seasonal pick-up in consumption.

·        Demand falls from year-earlier levels but still holds at third-highest level in past decade.

·        Firm demand coincides with rising auto lube consumption, slower drop in industrial oils consumption.

·        Firm consumption suggests slowdown in Japan’s industrial production in Q3 2023 could be short-lived.

·        Firm consumption absorbs more of Japan’s base oils supply, curbing availability for other markets.

·        Singapore’s base oils exports to southeast Asia and China hold firm over past four weeks to 1 Nov 2023, contrasting with slide in shipments to India.

·        Shipments to India dip even amid seasonal pick-up in demand in the country.

·        India also set to face slowdown in exports from Taiwan to the country in October, and still-closed arbitrage from US.

·        Trend boosts India’s reliance on October-loading shipments from South Korea and Mideast Gulf.

·        Shipments to India show signs of rising from both of those sources in Oct 2023.

·        India’s lower base oils supply in Sep 2023 contrasts with firm demand.

·        Supply lags demand for a second month in response.

·        Base oils supply shortfall curbs Indian buyers’ opportunity to replenish stocks ahead of seasonal pick-up in demand in Q4 2023.

·        Supply shortfall forces buyers to instead tap their existing stocks, cutting their inventories.

·        Supply shortfall curbs Indian buyers’ opportunity to replenish stocks ahead of rise in imported base oils prices in Q4 2023.

·        Supply shortfall reduces buyers’ leverage to push back against sellers’ higher price offers for supplies in Q4 2023.

·        Prospect of unexpected revival in US arbitrage shipments to India gives buyers more price leverage.

·        Any such shipments would be unlikely to arrive until 2H Dec 2023 at earliest.

·        Narrowing cfr India Group II light-grade premium to fob Asia prices suggests buyers see less urgency to keep arbitrage open from Asia.

·        Trend could reflect expectations of pick-up in surplus supplies from US.