Global base oils arb outlook: Week of 1 July

·        India’s imported brightstock cargo price premium to FOB Asia prices holds at highest in almost a year.

·        China’s domestic brightstock price premium to FOB Asia prices steadies at high levels after correcting lower in April and May 2024.

·        Strength of brightstock prices in destination markets like India, China and southeast Asia points to still-firm supply-demand fundamentals, contrasts with recent slowdown in demand for other products like Group II base oils.

·        Firm supply-demand fundamentals boost attraction of securing brightstock supplies from markets outside Asia.

·        Increasingly firm Europe and US export brightstock prices complicate any such moves.

·        Limited supply from those markets leaves India and China even more reliant on dwindling number of brightstock sources in Asia.

·        Dynamic increases the importance of securing alternative supply options.

·        Firm brightstock supply-demand fundamentals increase competition between China, India and southeast Asia for any surplus brightstock supplies in the Asia-Pacific region.

·        CFR India Group I brightstock price premium to FOB Asia price holds at more than $100/t through June 2024, close to highest in a year.

·        China’s domestic Group I brightstock price premium to FOB Asia price stays unusually high even after recent correction.

·        China’s recent domestic price correction cuts its premium to CFR India prices to lowest since early-Feb 2024, boosting attraction of moving more supplies to India.

·        Singapore’s bunker fuel sales rise in May 2024 to four-month high, with average bunker fuel consumption per vessel rising to second-highest level in more than seven years.

·        Strength of bunker fuel demand in Singapore points to firm marine lube consumption, and for more Group I brightstock to produce more marine lubes.

·        Tight supply in more distant markets curbs those markets' ability to tap the firm demand in Asia.

·        Europe’s export brightstock price flips back to premium to region’s domestic price, while steep premium to CFR India and ex-tank Singapore prices widens further.

·        US’ export brightstock price premium to FOB Asia price starts to rise from end-May 2024 after trending lower since mid-2023, complicating feasibility of additional flows from that market.

·        India and Singapore show signs of lining up more alternative brightstock supply options than China to supplement regular sources.

·        India takes delivery of brightstock supplies from Indonesia in April and May 2024 for first time in more than a year.

·        India starts to take delivery of brightstock supplies of US origin from end-2023, with regular shipments since then.

·        India takes delivery of more brightstock supplies from Saudi Arabia in first five months of 2024.

·        Shipments help to balance out pause in imports from Thailand since end-Q1 2024.

·        India and Singapore’s various alternative brightstock supply sources contrast with China’s more limited number of overseas sources.

·        Dynamic increases importance of China’s brightstock price maintaining levels that continue to attract more arbitrage shipments from Asia.