· Any rise in regional surplus supply in Q3 2023 could be smaller than expected amid plant maintenance, signs of lower shipments from southeast Asia and weaker margins.· China’s Shandong diesel price premium to crude oil extends fall to lowest in almost a year, to low end of long-term trend.· China’s weak diesel premium to crude, and higher cost of white oils, adds to incentive to cut output and boost base oils production.· China’s June base oils output stays rangebound and relatively low amid signs of a pause in recovery in production..· Signs of steadier base oils output in Q2 2023 could reflect impact of plant maintenance work. It could reflect domestic refiners’ reluctance to raise output because of weaker-than-expected demand.· China’s low base oils output fails to trigger rebound in base oils imports – suggesting domestic supply is sufficient to meet demand despite the low volume.· Any subsequent pick-up in Chinese base oils output would squeeze further country’s demand for overseas supplies unless demand revives.· China’s base oils output is likely to rise in July as more plants resume normal operations.· Japan’s base oils exports continue to trend lower in 1H 2023 as plant-maintenance in Q2 2023 follows plant closure in 2H 2022..· Trend likely to speed up in 2H 2023, when another plant is scheduled to be closed.· Drop in supplies from Japan set to have biggest impact on South Korea and Singapore.· South Korea’s base oils output shows signs of flatlining through Q2 2023 as high margins incentivize higher run-rates while plant maintenance cuts output..· South Korea’s steady base oils output eases prospect of supply-build at start of Q3 2023.· Thailand’s rising base oils exports this year partly reflect weak domestic demand, adding to regional supply.· China’s demand weakness leaves more of those supplies from Thailand moving to other markets like Mideast Gulf and India..· Tight supply and higher prices in Europe keep open the arbitrage to move shipments from Thailand to those markets.· Thailand’s balanced-to-tight supplies give refiners more leverage over prices..· Any need to sustain steady export flows to maintain supply-demand balance would require prices that keep arbitrage opportunities open.· Singapore’s weekly base oils exports slump last week to lowest in more than a year..· Size and speed of fall in exports suggests drop in supply may not have been planned.· Any sustained fall in shipments from Singapore over the coming weeks would coincide with a seasonal slowdown in demand throughout the Asia-Pacific region, could help limit any supply-build..Asia base oils - week of July 10: Demand outlook
· Any rise in regional surplus supply in Q3 2023 could be smaller than expected amid plant maintenance, signs of lower shipments from southeast Asia and weaker margins.· China’s Shandong diesel price premium to crude oil extends fall to lowest in almost a year, to low end of long-term trend.· China’s weak diesel premium to crude, and higher cost of white oils, adds to incentive to cut output and boost base oils production.· China’s June base oils output stays rangebound and relatively low amid signs of a pause in recovery in production..· Signs of steadier base oils output in Q2 2023 could reflect impact of plant maintenance work. It could reflect domestic refiners’ reluctance to raise output because of weaker-than-expected demand.· China’s low base oils output fails to trigger rebound in base oils imports – suggesting domestic supply is sufficient to meet demand despite the low volume.· Any subsequent pick-up in Chinese base oils output would squeeze further country’s demand for overseas supplies unless demand revives.· China’s base oils output is likely to rise in July as more plants resume normal operations.· Japan’s base oils exports continue to trend lower in 1H 2023 as plant-maintenance in Q2 2023 follows plant closure in 2H 2022..· Trend likely to speed up in 2H 2023, when another plant is scheduled to be closed.· Drop in supplies from Japan set to have biggest impact on South Korea and Singapore.· South Korea’s base oils output shows signs of flatlining through Q2 2023 as high margins incentivize higher run-rates while plant maintenance cuts output..· South Korea’s steady base oils output eases prospect of supply-build at start of Q3 2023.· Thailand’s rising base oils exports this year partly reflect weak domestic demand, adding to regional supply.· China’s demand weakness leaves more of those supplies from Thailand moving to other markets like Mideast Gulf and India..· Tight supply and higher prices in Europe keep open the arbitrage to move shipments from Thailand to those markets.· Thailand’s balanced-to-tight supplies give refiners more leverage over prices..· Any need to sustain steady export flows to maintain supply-demand balance would require prices that keep arbitrage opportunities open.· Singapore’s weekly base oils exports slump last week to lowest in more than a year..· Size and speed of fall in exports suggests drop in supply may not have been planned.· Any sustained fall in shipments from Singapore over the coming weeks would coincide with a seasonal slowdown in demand throughout the Asia-Pacific region, could help limit any supply-build..Asia base oils - week of July 10: Demand outlook
