Asia-Pacific base oils – week of June 12: Supply outlook

·        China’s Shandong diesel premium to crude stays relatively low, deterring rise in output.

·        China’s diesel demand likely to remain muted as lower consumption in industrial sector counters seasonal pick-up in demand in agricultural sector.

·        India’s retail diesel premium to crude extends rise, encouraging domestic refiners to maintain high run-rates.

·        India’s refiners maintain firm base oils output levels in Q2 2023 as they keep refinery run rates at high levels.

·        Discounted feedstock costs continue to incentivize refiners in markets like India and China to boost output and re-sell products like base oils at competitive levels at or below market prices.

·        The moves add to base oils supply in both markets, cutting import requirements and increasing prospect of more exports.

·        Most plant maintenance work in northeast and southeast Asia set to be completed by end-Q2 2023.

·        Indonesia’s April Group III base oils shipments rebound from 28-month low in March.

·        Supplies add to signs of more healthy global availability of Group III base oils in Q2 2023 despite maintenance work affecting two major plants.

·        Thailand’s April base oils supply lags demand for fourth month amid signs that refiners seek to maintain low stocks.

·        Strategy adds volumes to well-supplied markets at a time when outright prices face pressure but price premium to diesel stays high.

·        Strategy of lower stocks cuts refiners’ exposure to lower prices.

·        Conversely, refiners often seek to hold back supplies when prices are trending up in order to lock in higher prices.

·        Asia’s base oils supply falls sharply in April from March, coincides with rising base oils premium to crude and diesel.

·        Scheduled plant maintenance work likely keeps supply at lower levels through Q2 2023.

·        South Korea’s April base oils’ share of total refinery output rises to 10-month high against backdrop of strong margins.

·        South Korea’s higher base oils output in early Q2 2023 cushions slowdown in regional supply.

·        Rising supply coincides with lower diesel output as a share of total refined products output, amid firm base oils premium to diesel.

·        Those same price dynamics extend into June, incentivizing refiners to maintain firm base oils output and lower diesel output.