Global base oils – week of 5 Sep: Supply outlook

· Diesel premium to crude stays unusually firm after strong rebound in August.

· India retail diesel premium to crude rises, still unusually low – incentivizes refiners to boost base oils output.

· China’s Shandong province diesel premium to crude extends surge, incentivises refiners to maximise diesel output.

· US, Japan refinery run rates hold firm, China Shandong run rates lower.

· Global plant maintenance activity to pick-up after summer lull.

· Prospect of refinery run cuts in markets like Asia likely to add to drop in surplus supply.

· Ongoing/upcoming maintenance work in US, Europe, and Asia-Pacific curb surplus supply.

· Closure of Japanese base oils unit in coming weeks likely to impact trade flows.

· Sustained slowdown in Mideast Gulf Group III base oils supplies in 1H 2022 suggest lower run rates or plant maintenance.

· US supply buffer in case of weather-related damage likely to be cut if/as concerns wane.

· Any such move unlikely for now amid expectations hurricane season to get busier over coming weeks.

· Supply preparations ahead of planned maintenance in US could limit extent of US surplus/drawdown of supply buffer.

· Thailand’s surplus supply could be more muted ahead of maintenance work/signs of firm domestic demand.

· China’s base oils production likely fell even more in August.

· Indonesia’s Group I supply surplus for export likely to stay limited amid firm domestic demand.

· Steady flow of Asia shipments continues to be lined up for distant markets, clearing surplus.

· India takes delivery of unusually large volume of cargoes from Taiwan in August.

· India takes delivery of more Group I/II light grades of Chinese origin in August.

· Singapore 4-week avg base oils exports hold in narrow, low range, well below pre-pandemic levels.

· Singapore 4-week avg base oils exports to China hold close to 2-month high.

· Singapore 4-week avg base oils imports from Japan stay higher than usual.

· Japan supplies account for larger-than-usual share of Singapore’s imports in recent months.

· Flows from Japan likely to change following closure of Japanese Group I plant.

· Pause in shipments from Europe to Singapore extends into fourth month.

· Taiwan’s August base oils exports rise, volume to China stays low.

· Large volume of Taiwan cargoes moves to SE Asia in recent weeks.