Asia base oils supply outlook: Week of 10 Feb

·         Asia’s base oils prices rise strongly versus feedstock and competing fuel prices, more than reversing recent weakness in Jan 2025.

·         Rising base premiums coincide with/precede increasingly widespread round of plant maintenance throughout Asia over coming months.

·         Plant maintenance likely to limit availability of spot supplies, complicating options for buyers relying on spot volumes to boost inventories.

·         Plant maintenance could also squeeze sellers’ term volumes to lower end of agreed range.

·         Premium of CFR India Group II prices over US export prices stays narrower than in Feb 2024.

·         Narrower premium, and signs of sellers’ growing inflexibility over price levels, puts onus on buyers to adjust prices to make arbitrage more feasible.

·         Narrower premium raises prospect of continuing to curb volume of arbitrage shipments from US.

·         Taiwan’s Group II base oils export volumes stay high so far in Feb 2025, with signs of strong pick-up in shipment of heavy grades.

·         South Korea’s base oils output falls in Dec 2024 to second-lowest level in eight months.

·         Output likely stayed lower than usual in Jan 2024 because of lower run-rates.

·         Lower output at end-2024 and early this year could complicate moves to build stocks ahead of planned plant maintenance from end-Feb 2024.

·         Lower output cuts size of Asia’s supply surplus at end-2024 and early this year, at time of year when it typically rises.

·         Lower output limits option for overseas buyers to build stocks as buffer ahead of plant maintenance.

·         Lower stocks and smaller regional surplus could magnify impact of plant shutdowns during Q1-Q2 2025.

·         Thailand’s base oils output holds firm in Dec 2024, rises in Q4 2024 to highest since H1 2021.

·         Thailand’s firm output supports total supply at high level that outpaces demand, leaving large surplus at year-end.

 ·         Asia’s firm Group I heavy-grade base oils prices point to ongoing supply tightness, suggesting that rise in Thailand’s supply is insufficient to plug shortfall.

·         Dynamic leaves Asia increasingly reliant on sources outside the region to cover its Group I base oils requirements.

·         Dynamic curbs Asia’s ability to supply other markets like India and Middle East with additional Group I supplies.

·         Asia’s base oils supply, less regional demand and China’s base oils imports, barely maintains surplus in Dec 2024.

·         Drop in surplus mirrors similar trend in Dec 2023, contrasts with large surplus in Dec 2022.

·         Lower surplus cuts pressure on refiners to line up arbitrage shipments.

·         Lower surplus increases pressure on refiners and blenders to replenish stocks ahead of plant maintenance.

·         Combined Group I base oils exports from Thailand, Japan, Indonesia fall to ten-month low in Dec 2024.

·         Lower supply likely further tightens availability of Group I brightstock at start of 2025.

·         Lower supply sustains demand for supplies from other regions.

·         China’s paraffinic base oils output holds steady in Jan 2025 even with lunar new year holidays falling in month of January this year.

·         China’s base oils output fell in Feb 2024 from Jan 2024, coinciding with lunar new year holidays falling in month of February last year.

·         Trend raises to prospect of rise in demand in Feb 2025, subsequent rise in supply to meet demand, and rise in domestic output to boost supply.

·         Dynamic would cut China’s requirements for supplies from overseas markets.

·         Singapore’s base oils exports rebound in past week but stay lower than usual in four weeks to early-Feb 2025.

·         Singapore takes delivery of another cargo from Netherlands, boosting imports from Europe in last four weeks to highest in almost two years.

·         Sustained flow of shipments from Europe helps to boost regional supply ahead of seasonal pick-up in demand and plant maintenance work.

·         Asia’s base oils imports from Qatar fall to twenty-two-month low in Dec 2024.

·         Unusually-large dip in imports points to change in trade flows or to production issues in Q4 2024.