· Asia’s base oils supply shows signs of staying balanced-to-tight through Q3 2023, likely to tighten in coming weeks amid plant maintenance, run-cuts, plant closure.· China’s Shandong diesel prices hold firm versus feedstock prices, contrasting with country's weak base oils values versus diesel..· Firm diesel and weak base oils values likely to incentivize China’s refiners to extend plant maintenance work/run-cuts.· Plant maintenance work/closure impacts supply in China, Japan, Taiwan, India over coming weeks.· Asia-Pacific Group II light-grade prices maintain discount to gasoil prices, incentivizing refiners to cut base oil run-rates.· India-bound base oils supplies face prospect of slowing as upcoming plant-maintenance in Taiwan cuts supplies from that market.· Shipments to India face further slowdown amid pause in arbitrage flows from US and as weak light-grade base oils prices incentivize refiners to produce more diesel instead. .· Asia’s July base oils exports already fall to lowest since 1H 2020, with slowdown coinciding with seasonal dip in lube demand..· Lower exports leave supply-demand fundamentals more balanced, even as regional prices weaken relative to crude and diesel.· Asia’s lower base oils exports partly reflect refiners’ lower supply, could also reflect signs of refiners facing rising inventories.· Any such supply-build would keep pressure on refiners to maintain competitive prices and to raise exports. .· China’s August paraffinic base oils output stays low in the face of slack demand and low margins..· Lack of any significant pick-up in output coincides with domestic blenders’ preference to limit stock-replenishment plans ahead of seasonal pick-up in demand at end-Q3 2023.· Trend leaves blenders exposed to risk of supply lagging demand in coming weeks.· Blenders’ preference to maintain lower stocks suggests they expect supply to be sufficient even with a pick-up in demand.· Those expectations suggest buyers anticipate seasonal pick-up in demand will be muted.· Those expectations also coincide with signs of pick-up in China’s base oils imports in August that contrasts with steady output volumes.· Low base oils output and higher imports add to signs that overseas refiners are better able than China’s domestic refiners to manage impact of squeezed margins..· Japan’s July base oils exports fall to nineteen-month low amid dwindling supply surplus..· Country’s supply surplus set to narrow further in coming months because of plant maintenance and plant closure.· Slowdown in July exports include slump in shipments to Singapore and South Korea.· Those markets will likely need to line up alternative supply sources as availability from Japan tightens over coming months..· Indonesia’s July Group I base oils exports fall to lowest since 1H 2020 amid firm domestic demand, weak regional prices..· Prolonged slowdown in Indonesia’s Group I exports curbs prospect of that country covering for likely drop in Group I supplies from Japan.· Trend raises prospect of rising regional demand for Group I supplies from Thailand..· Thailand’s July base oils surplus of supply over demand rises to eleven-month high..· Rising surplus raises prospect of sustained pick-up in base oils exports..· Indonesia’s July Group III base oils exports fall to four-month low, cutting supply at a time when global Group III prices have weakened steadily versus other grades.· Almost all the July supplies moved to South Korea – from where a large portion typically moves to the US..· Shipments contrast with pause in exports to Europe for first time in four months.· Trend coincides with firmer US Group III prices relative to Europe prices, reviving attraction of shipping more Group III supplies to the US..· Indonesia’s July imports from Singapore extend surge, contrasting with slide in shipments from South Korea..· Singapore’s rising flows to Indonesia help counter slower demand in China.· South Korea’s falling flows to Indonesia increase pressure on country’s refiners to line up alternative outlets as they also face slower demand in China..Global base oils - week of Sep 11: Price outlook - arbitrage
· Asia’s base oils supply shows signs of staying balanced-to-tight through Q3 2023, likely to tighten in coming weeks amid plant maintenance, run-cuts, plant closure.· China’s Shandong diesel prices hold firm versus feedstock prices, contrasting with country's weak base oils values versus diesel..· Firm diesel and weak base oils values likely to incentivize China’s refiners to extend plant maintenance work/run-cuts.· Plant maintenance work/closure impacts supply in China, Japan, Taiwan, India over coming weeks.· Asia-Pacific Group II light-grade prices maintain discount to gasoil prices, incentivizing refiners to cut base oil run-rates.· India-bound base oils supplies face prospect of slowing as upcoming plant-maintenance in Taiwan cuts supplies from that market.· Shipments to India face further slowdown amid pause in arbitrage flows from US and as weak light-grade base oils prices incentivize refiners to produce more diesel instead. .· Asia’s July base oils exports already fall to lowest since 1H 2020, with slowdown coinciding with seasonal dip in lube demand..· Lower exports leave supply-demand fundamentals more balanced, even as regional prices weaken relative to crude and diesel.· Asia’s lower base oils exports partly reflect refiners’ lower supply, could also reflect signs of refiners facing rising inventories.· Any such supply-build would keep pressure on refiners to maintain competitive prices and to raise exports. .· China’s August paraffinic base oils output stays low in the face of slack demand and low margins..· Lack of any significant pick-up in output coincides with domestic blenders’ preference to limit stock-replenishment plans ahead of seasonal pick-up in demand at end-Q3 2023.· Trend leaves blenders exposed to risk of supply lagging demand in coming weeks.· Blenders’ preference to maintain lower stocks suggests they expect supply to be sufficient even with a pick-up in demand.· Those expectations suggest buyers anticipate seasonal pick-up in demand will be muted.· Those expectations also coincide with signs of pick-up in China’s base oils imports in August that contrasts with steady output volumes.· Low base oils output and higher imports add to signs that overseas refiners are better able than China’s domestic refiners to manage impact of squeezed margins..· Japan’s July base oils exports fall to nineteen-month low amid dwindling supply surplus..· Country’s supply surplus set to narrow further in coming months because of plant maintenance and plant closure.· Slowdown in July exports include slump in shipments to Singapore and South Korea.· Those markets will likely need to line up alternative supply sources as availability from Japan tightens over coming months..· Indonesia’s July Group I base oils exports fall to lowest since 1H 2020 amid firm domestic demand, weak regional prices..· Prolonged slowdown in Indonesia’s Group I exports curbs prospect of that country covering for likely drop in Group I supplies from Japan.· Trend raises prospect of rising regional demand for Group I supplies from Thailand..· Thailand’s July base oils surplus of supply over demand rises to eleven-month high..· Rising surplus raises prospect of sustained pick-up in base oils exports..· Indonesia’s July Group III base oils exports fall to four-month low, cutting supply at a time when global Group III prices have weakened steadily versus other grades.· Almost all the July supplies moved to South Korea – from where a large portion typically moves to the US..· Shipments contrast with pause in exports to Europe for first time in four months.· Trend coincides with firmer US Group III prices relative to Europe prices, reviving attraction of shipping more Group III supplies to the US..· Indonesia’s July imports from Singapore extend surge, contrasting with slide in shipments from South Korea..· Singapore’s rising flows to Indonesia help counter slower demand in China.· South Korea’s falling flows to Indonesia increase pressure on country’s refiners to line up alternative outlets as they also face slower demand in China..Global base oils - week of Sep 11: Price outlook - arbitrage