Asia base oils - week of Aug 7: Demand outlook

·        Asia-Pacific base oils demand could get boost in coming weeks from stock-replenishment in China, relatively balanced regional supplies, and expectations that prices are more likely to rise than fall.

·        Asia’s lube demand likely to rise in Q4 2023 vs Q3 2023, contrasting with slower consumption in Q4 vs Q3 in Europe and Latin America.

·        Firmer demand likely to absorb more regional supplies, reduce likelihood of significant supply-build.

·        Firmer demand in Q4 2023 would coincide with plant maintenance in Asia and follow weak base oils margins in Q3 2023.

·        China’s July base oils imports show signs of falling from June to lowest since start of year.

·        China’s July base oils imports likely included bright stock cargoes from Thailand.

·        Bright stock cargoes would be first such shipments from the southeast Asian country to China in four months.

·        China’s domestic base oils demand likely stays muted in early August even in face of rising crude prices and tighter supply.

·        Trend raises prospect of stronger pick-up in demand in coming weeks as blenders seek to replenish low stocks ahead of seasonal rise in lube consumption at end Q3/early Q4 2023.

·        China’s July automobile sales fall from June and yoy; alternative-fuel vehicle sales edge down from June, surge yoy.

·        China’s July automobile sales face pressure from seasonal slowdown, support from stimulus measures.

·        Japan’s Q2 base oils/lube demand holds firm as recovery in automobile lubricants starts to extend to industrial oils.

·        Steady-to-firm demand adds to similar signs in several markets in southeast Asia, curbing prospect of large build-up of surplus base oils supply in region during Q3 2023.

·        Singapore’s sustained slowdown in weekly base oils exports to China contrasts with rising shipments to Indonesia.

·        Dynamic reflects signs of firmer demand growth in Indonesia and steady-to-lower consumption in China.

·        Shipment of more supplies from Hong Kong to Singapore last week could reflect diversion of supplies originally bound for China.

·        India’s retail diesel price premium to imported very-light grade base oils widens to highest since February 2022.

·        India’s demand for very-light grade base oils typically rises when diesel premium to base oils prices widens.

·        Seasonal rise in demand in Q4 2023, prospect of higher prices, and prospect of tighter supplies of very-light grade base oils could support firmer Indian demand.