Asia base oils supply outlook: Week of 11 Nov

·        Asia’s base oils prices hold firm relative to feedstock/gasoil prices, especially for heavy grades.

·        Firm base oils values partly reflect tighter regional supply in recent months.

·        Base oils values stay firm even with Asia’s recent supply tightness likely to ease over coming weeks following completion of plant maintenance work.

·        Less feasible arbitrage to other markets, and more feasible arbitrage from other markets to Asia, could boost regional supply further.

·        Improving supply would follow drop in Asia’s base oils supply to seven-month low in Sept 2024.

·        Fall in supply coincides with slump in Asia’s base oils exports to four-year low, tightening availability throughout the region.

·        Drop in supply cuts surplus over demand to three-month low in Sept 2024.

·        Surplus would have been even smaller but for drop in Asia’s lube demand in Sept 2024.

·        Tight supply likely to cushion impact of weaker demand at start of Q4 2024.

·        Steady-to-lower base oils margins in recent weeks adds to signs that peak period of supply-tightness has passed.

·        Expected improvement in supply from around middle of Q4 2024 would contrast with prospect of seasonal slowdown in demand.

·        Dynamic could trigger rise in surplus supplies during final weeks of Q4 2024 and early next year.

·        Firm margins that incentivize refiners to maintain or raise output could add to size of surplus.

·        China’s paraffinic base oils output rises in Oct 2024 to highest since end-2021.

·        Output gets boost from surge in production of Group II/III base oils.

·        Rising output of premium-grade base oils boosts their share of China’s paraffinic base oils production to highest in almost three years.

·        That share is likely to rise even more following closure of key Group I base oils unit in China in Oct 2024.

·        Rising base oils output likely to cut further China’s requirements for overseas supplies.

·        Trend would free up more shipments needing to seek alternative outlets.

·        Trend would help to boost regional supply at a time when availability has been tighter in recent months.

·        Trend would help to boost regional supply at a time when availability is set to improve in the coming months.

·        Thailand’s base oils output rises in Q3 2024 to highest quarterly level since H1 2022.

·        Higher output contrasts with typical drop in production in third quarter of the year, when demand usually slows.

·        Asia’s firm Group I base oils margins in Q3 2024 highlight tight supply-demand dynamics for the grade even with Thailand’s higher base oils output.

·        Thailand’s base oils supply exceeds demand in Sept 2024 for second time in three months.

·        Pick-up in surplus supply raises prospect of rise in Group I base oils exports in Q4 2024.

·        Singapore takes delivery of another large cargo from Saudi Arabia in past week.

·        Cargo likely consists of Group I base oils, adds to large rise in shipments from Saudi Arabia to Singapore in H2 2024.

·        Rise in shipments from Saudi Arabia and Europe to southeast Asia in H2 2024 help to boost region’s Group I base oils supply.

·        Taiwan’s base oils exports stay lower so far in Nov 2024 after surge in flows at end-Oct 2024.