Asia base oils supply outlook: Week of 10 March

·         Asia’s base oils prices extend rise vs feedstock/gasoil prices.

·         Rising margins point to increasingly tight supply-demand fundamentals, incentivizing refiners to maximise output.

·         Incentive to maximise output coincides with closed arbitrage from Asia to other markets, and signs of steady flows from other regions to Asia.

·         Dynamic raises prospect of pick-up in surplus supply if demand were to ebb.

·         Stock-building ahead of scheduled plant maintenance and seasonal pick-up in demand likely magnified supply tightness in recent weeks.

·         Unexpected plant maintenance work in March 2025 could leave supply tighter for longer.

·         Taiwan’s base oils exports show signs of slowing in early-March 2025 compared with same period in Feb 2025.

·         Even so, with refiners’ and buyers’ stocks replenished, supply-tightness could start to ease following start of scheduled plant maintenance work.

·         Typical seasonal slowdown in consumption in month of April also curbs urgency for buyers to add to stocks.  

·         Singapore’s base oils exports rise sharply over past week, lifting shipments over past four weeks to highest since Q3 2023.

·         Sustained rise in exports since early-Feb 2025 adds to similar pick-up in shipments from Taiwan since then.

·         Singapore takes delivery in past week of largest weekly volume of shipments of European origin in more than three years.

·         Shipments sustain imports from Europe over past four weeks at unusually firm levels, extending trend since end-Q3 2024.

·         Sustained pick-up in shipments from Europe adds to supply in Asia-Pacific market.

·         China’s base oils output, based on production per day, rises in Feb 2025 to four-month high as higher premium-grade production counters slump in Group I output.

·         Scant signs of sharp pick-up in demand for overseas supplies early this year suggests that domestic supply is increasingly sufficient to cover requirements.

·         China’s Group I base oils accounts for less than 13% share of country’s output in Feb 2025, down from 17% share in 2024 and 22% in 2023.

·         Falling share highlights China’s growing output of premium grades, and falling output and demand for Group I base oils.

·         Japan’s base oils surplus edges lower in Jan 2025 after surging in Q4 2024 despite falling domestic output.

·         Rising surplus reflects surge in imports of premium-grade base oils and fall in exports of Group I base oils.

·         Surplus rises despite plant maintenance work during H2 2024.

·         Trend suggests Japan could face persistent surplus even with plant maintenance work in 2025.

·         Trend could prompt pick-up in exports from unusually low levels in H2 2024, extending such a move in Jan 2025.

·         Volume of any such extended pick-up in exports would likely be small.

·         A lack of extra Group I brightstock supplies in any additional exports would curb benefit of such a rise in supplies.

·         By contrast, any such additional supplies would be welcome in a region facing persistently tight availability of Group I brightstock.

·         Thailand’s Group I base oils output falls to eleven-month low in Jan 2025.

·         Lower output follows rise in Thailand’s surplus supply in Q4 2024 to multi-year high.

·         Lower output speeds up removal of supply-surplus.

·         Lower output precedes seasonal rise in demand in Asia later in Q1 2025.

·         Lower output and signs of rebalancing of supplies highlight lack of hedging tools that could help manage risk of building stocks ahead of seasonal rise in demand.

·         Lower output and lower stocks instead raise prospect of magnifying impact of seasonal rise in demand.

·         Global base oils exports rise by 6% in Q4 2024 from year earlier to highest since early 2020.

·         Exports rise in Q4 2024 even as shipments fall to three-month low in Dec 2024 amid dip in shipments from Asia especially, as well as Europe and US.

·         Exports rise in Q4 2024 because of surge in shipments in Oct-Nov 2024, especially to markets like Mexico and Africa.

·         Slowdown in exports in Dec 2024 points to more muted pressure to clear surplus volumes at end-2024 and early this year.

·         Dynamic highlights importance of outlets like Mexico and Africa to clear surplus volumes.

·         Importance of those kinds of outlets set to grow as new base oils production capacity adds to global supply over coming year.