· Asia’s Group I/II base oils price premium to gasoil holds firm so far in Q3 2024, well above year-earlier levels, even after slipping in June 2024..· Firm premium in Q2 2024 and so far in Q3 2024 points to strong supply-demand fundamentals, incentivizes refiners to maintain or raise base oils output..· Other price signals point to more muted demand.· FOB NE Asia Group II price discount narrows vs domestic China and CFR India prices in April-May 2024..· Price discount narrows amid weaker demand in India and China, complicating arbitrage shipments to those markets.· Discount stays narrow this month even after widening in June 2024..· Weaker demand and less feasible arbitrage to Asia’s largest markets incentivize refiners to cut base oils output or redirect supplies to other markets.· Incentive to cut base oils output contrasts with firm base oils premium to gasoil that incentivizes refiners to raise base oils output.· Base oils exports from key producers in Asia fall sharply in June 2024..· Simultaneous fall in exports from key producers cuts shipments to second-lowest level since May 2020, when pandemic-related restrictions slashed regional demand.· Exports fall in June 2024 even with no scheduled plant maintenance work. · Fall in exports likely reflects drop in refinery production levels more than stock-building.· Drop in exports and output duly cushions impact of slowdown in demand, trimming surplus volumes carried into start of Q3 2024.· Smaller surplus limits pressure on refiners to adjust prices to open arbitrage to other markets.· Smaller surplus in turn helps to sustain firm base oils margins.· Drop in Asia’s base oils exports and output in June 2024 suggests refiners responded more to signs of slowdown in regional demand than to firm base oils margins.· Dynamic highlights importance of responding to appropriate price signal if the goal is to maintain supply-demand balance..Global base oils margins outlook: Week of 29 July.Asia base oils supply outlook: Week of 29 July.Asia base oils demand outlook: Week of 29 July
· Asia’s Group I/II base oils price premium to gasoil holds firm so far in Q3 2024, well above year-earlier levels, even after slipping in June 2024..· Firm premium in Q2 2024 and so far in Q3 2024 points to strong supply-demand fundamentals, incentivizes refiners to maintain or raise base oils output..· Other price signals point to more muted demand.· FOB NE Asia Group II price discount narrows vs domestic China and CFR India prices in April-May 2024..· Price discount narrows amid weaker demand in India and China, complicating arbitrage shipments to those markets.· Discount stays narrow this month even after widening in June 2024..· Weaker demand and less feasible arbitrage to Asia’s largest markets incentivize refiners to cut base oils output or redirect supplies to other markets.· Incentive to cut base oils output contrasts with firm base oils premium to gasoil that incentivizes refiners to raise base oils output.· Base oils exports from key producers in Asia fall sharply in June 2024..· Simultaneous fall in exports from key producers cuts shipments to second-lowest level since May 2020, when pandemic-related restrictions slashed regional demand.· Exports fall in June 2024 even with no scheduled plant maintenance work. · Fall in exports likely reflects drop in refinery production levels more than stock-building.· Drop in exports and output duly cushions impact of slowdown in demand, trimming surplus volumes carried into start of Q3 2024.· Smaller surplus limits pressure on refiners to adjust prices to open arbitrage to other markets.· Smaller surplus in turn helps to sustain firm base oils margins.· Drop in Asia’s base oils exports and output in June 2024 suggests refiners responded more to signs of slowdown in regional demand than to firm base oils margins.· Dynamic highlights importance of responding to appropriate price signal if the goal is to maintain supply-demand balance..Global base oils margins outlook: Week of 29 July.Asia base oils supply outlook: Week of 29 July.Asia base oils demand outlook: Week of 29 July