Asia base oils supply outlook: Week of 10 June

·        Asia’s base oils supply likely to stay more readily available as margins stay high, incentivizing refiners to maximise output.

·        South Korea’s base oils exports likely revived in May 2024 from April 2024, with signs of strong pick-up in shipments to US.

·        CFR India N70 premium to Singapore gasoil prices holds close to highest since Nov 2023.

·        Firm premium incentivizes Asia’s refiners to maximise production of light-grade base oils rather than diesel.

·        Taiwan’s base oils exports revive in early June 2024, with pick-up in shipments of heavy grades especially.

·        Singapore’s re-exports of base oils originating from other regions rise over last four weeks to highest four-week volume since July 2023.

·        Any sustained rise in re-exports of shipments that originated from other regions would add to Singapore and Asia’s base oils supply.

·        Any sustained rise in re-exports over coming months would coincide with a time of year when demand in Asia typically faces a seasonal slowdown.

·       China’s May paraffinic base oils output holds in narrow range even as closed arbitrage boosts domestic buyers’ reliance on supplies from local refiners.

·       Steady output, closed arbitrage and lower Group II base oils premium to Shandong diesel prices point to weak demand.

·       Planned shutdown of several domestic Group II units in China over coming weeks would coincide with typical seasonal slowdown in demand during summer months.

·       Lower output and lower demand likely to curb China’s requirements for additional supplies from overseas refiners.

·       Thailand’s April Group I base oils output falls, keeping the country’s production levels unusually low so far this year.

·       Thailand’s lower base oils output and Japan’s sliding base oils exports more than outweigh seasonal slowdown in regional demand in April, keeping regional Group I supplies tighter than usual.

·       Tighter supply from two of Asia’s key Group I producers likely to curb the region’s ability to move arbitrage shipments to Europe to cover for that market's tighter supply, especially of brightstock.

·       Typical slowdown in China’s brightstock demand from end of second quarter of the year could ease supply tightness of the heavy-grade product.

·       Any surplus brightstock volumes could move to markets like India and UAE rather than to Europe.

·       India’s May base oils imports show signs of staying at least as high as import volumes in April 2024.

·       India’s May base oils imports get boost from signs of pick-up in shipments from Saudi Arabia compared with recent months.

·       Pick-up in flows from Saudi Arabia to India shows signs of extending into June 2024.

·        Several cargoes of Group III base oils reach India in early June 2024 from UAE and Bahrain.

·        Pick-up in shipments from those markets adds to India’s supply, points to more muted Group III demand in other markets.