Asia base oils supply outlook: Week of 24 Feb

·         Asia’s Group I/Group II heavy-grade prices hold firm vs feedstock/gasoil prices, especially for the time of year.

·         Firm margins point to tighter supply-demand fundamentals ahead of and during round of plant maintenance work.

·         Supply tightness likely to peak in month of March, when lower regional production coincides with seasonal rise in demand.

·         Blenders more reliant on spot volumes for larger share of their requirements likely to face higher impact of tighter supply.

·         Lower-than-usual flow of arbitrage shipments from US and Europe to Asia this year contrasts with signs of higher-than-usual flow of term shipments from those markets to Asia.

·         Sustained rise in Singapore’s base oils exports over past month coincide with high export volumes from Taiwan.

·         Rising shipments from those markets help to cushion impact of slowdown in exports from South Korea in Jan 2025 and likely extension of that slowdown at least to early-Q2 2025.

·         Singapore’s weekly base oils exports surge last week to highest level since Aug 2023.

·         Rising shipments lift total exports over past four weeks to highest since July 2024.

·         Supply in southeast Asia gets further boost from arrival in past week of shipments from US, Saudi Arabia and Russia to Singapore.

·         Most of the supplies likely consist of Group I base oils.

·         Shipment from US is second this year, following pause in such flows during Q4 2024.

·         Shipment from Russia extends sharp pick-up in flows from that source in past two months.

·         Rise in shipments from sources like Russia support revival in Singapore’s Group I base oils imports, following slump in shipments in H1 2024.

·         Recovery extends into Jan 2025 and first three weeks of Feb 2025.

·         Recovery in imports eases southeast Asia’s tight supply of Group I base oils.

·         Origin of imports suggests most of the supplies cover term commitments rather than reflect arbitrage flows.  

·         Singapore’s base oils imports from China slump from Nov 2024, with slowdown extending into first three weeks of Feb 2025.

·         Slide in shipments from Nov 2024 follows closure of major Group I plant in China in Oct 2024.

·         Extension of fall in shipments into early this year precedes maintenance work on several key base oils units in China.

·         Slide in shipments forces buyers to line up alternative supplies from other sources.

·         Taiwan’s base oils exports in Feb 2025 show signs of already exceeding total shipments in all of Jan 2025.

·         Heavy-grade base oils likely accounts for more than half of Taiwan’s exports in Feb 2025 for second month.

·         South Korea’s base oils exports fall even lower in Jan 2025.

·         Unusually low exports curb supply-build in Asia at start of the year.

·         Unusually low exports curb opportunity for buyers to replenish stocks before market fundamentals tighten later in Q1 2025.

·         Low exports could reflect refinery stock-building ahead of plant maintenance work.

·         Such moves would cushion impact of plant maintenance work.

·         Low exports could reflect lower production in South Korea at end-2024 and early 2025.

·         Such a scenario would complicate stock-building ahead of plant maintenance work, compounding the impact of the plant shutdown.

·         Saudi Arabia’s base oils exports slide in Jan 2025, show signs of staying low so far in Feb 2025.

·         Any extended dip in shipments from Saudi Arabia would put pressure on buyers in Middle East and India to seek supplies from other sources instead.