Asia base oils supply outlook: Week of 13 May

·        Asia’s base oils supply likely to get support from firm margins, scant plant maintenance work over the coming months, and limited arbitrage opportunities.

·        Asia’s base oils prices extend rise versus regional diesel prices, boosting refiners’ incentive to increase output.

·        Refiners face growing incentive to raise output even amid less attractive arbitrage to key markets within Asia and to more distant markets.

·        Incentive to raise output, combined with less workable arbitrage opportunities, could trigger faster build-up of surplus volumes.

·        South Korea’s base oils exports in H1 May 2024 show signs of outpacing exports in H1 April 2024.

·        A pick-up in exports would follow restart of Group III base oils unit in South Korea in late-April 2024 following maintenance work.

·        Taiwan’s base oils exports pause since early May 2024, following signs of lower-than-usual volumes in April 2024.

·        Pause in shipments extends sharp slowdown in Taiwan’s exports to China since mid-April 2024.

·        Singapore’s base oils exports show signs of holding at firmer levels since early-April 2024, after slowdown in shipments in H2 March 2024.

·        China’s April paraffinic base oils output falls as Group I production dips to eight-month low.

·        Group I output likely to recover in May 2024 following expected completion of plant maintenance work at the beginning of the month.

·        China’s Group II supply could be getting support from Group III units whose specifications remain closer to Group II than Group III.

·        Thailand’s March base oils output rises to seven-month high following completion of plant maintenance work during Jan-Feb 2024.

·        Rise in production and year-on-year drop in Thailand’s domestic lube consumption triggers surge in surplus supply to eight-month high.

·        Rise in surplus supply raises prospect of pick-up in base oils exports in Q2 2024 to manage surplus.

·        Prospect of steady output at higher levels and seasonal slowdown in domestic consumption at start of Q2 2024 adds to pressure to clear surplus volumes to avoid a larger supply-build.

·        Singapore takes delivery of large volume of supplies from Thailand in early May 2024.

·        Volume exceeds Singapore's total imports from Thailand in each of the previous seven months.

·        Asia’s firm Group I base oils prices suggest regional supply remains tight even with improving availability of supply from Thailand.

·        Singapore takes delivery of another large cargo from the US in early May 2024.

·        Shipment extends strong pick-up in imports from the US since Feb 2024.

·        Extension of trend points to structural change that is less linked to arbitrage opportunities.

·        India’s base oils imports show signs of rising strongly in April 2024 as wave of arbitrage shipments arrive from growing number of sources.

·        India’s April imports include regular volumes from Saudi Arabia, with trend showing signs of continuing in May 2024.

·        Steady flows from Saudi Arabia curb buyers’ need to line up supplies from alternative sources like US.