· Asia’s Group II base oils price discount weakens or flips to premium versus prices in regular outlets like China and India.· Less feasible arbitrage to key outlets coincides with seasonal slowdown in demand in those markets, raising prospect of rise in surplus supplies.· Rise in surplus supplies would put pressure on Asia refiners to cut output or prices to limit supply-build.· Pressure to cut prices or output may be more limited for Group II heavy grades because of signs of less surplus supply and firmer demand.· Taiwan’s Group II base oils exports stay lower than usual in April and May 2024..· Lower exports magnify impact of heavy-grades’ lower share of those exports..· More limited supply from markets like Taiwan contrasts with steady-to-firm demand for Group II heavy grades both within and outside Asia-Pacific region.· In China, domestic Group II heavy-grade premium to light grades extends rise in June 2024 to highest in more than two years..· Higher heavy-grade premium points to tighter fundamentals, facilitates arbitrage flows to that market..· Structurally, tighter supplies of Group I SN 500 boosts blenders’ incentivize to use more Group II heavy grades in their lubricants formulations, especially for marine lubricants.· Regionally, India’s imports of Group II heavy grades extend steady rise in 2024..· Pakistan’s base oils imports are low compared with India.· Pakistan’s imports of Group II heavy grades account for more than 50% of its total imports in 2023 and in Q1 2024.· Pakistan's larger share of heavy-grade imports magnify impact of its demand for heavy grades compared with markets like India..· Pakistan’s Group II heavy-grade imports rise more than 30% in Q1 2024 from year-earlier levels, outpacing rise in country’s total imports..· Outside Asia, rising US base oils prices make more feasible the arbitrage to move Group II heavy-grade base oils to outlets in Latin America..· Any arbitrage shipments to those markets would cut further the volume of supplies in Asia-Pacific region.· Tighter heavy-grade supply and steady-to-firm demand would curb size and speed of any supply-build.· A smaller or slower supply-build of heavy grades would ease extent of any adjustment to prices or output in response..Asia base oils demand outlook: Week of 10 June.Asia base oils supply outlook: Week of 10 June.Base Oil News stories and analysis also available on ICIS platform
