Asia base oils supply outlook: Week of 13 October

·         Asia’s Group II base oils price-premium to Singapore gasoil holds in narrow range.

·         Firm gasoil premium to crude oil puts more pressure on refiners to trim light-grade supply rather than heavy grades, despite persistent surplus availability of heavy grades.

·         Asia’s base oils supply-surplus could face more upward pressure over coming months, even with firmer gasoil premium to crude, amid lighter round of plant-maintenance and start-up of new base oils units.

·         Asia’s base oils supply already rises to thirteen-month high in Aug 2025 following completion of most plant-maintenance work.

·         Supply rises in Aug 2025 from year-earlier levels for first time in four months and just second time this year.

·         Persistent fall in supply earlier this year curbs build-up of surplus volumes.

·         Supply could now extend rise in coming months.

·         Rise in supply in Aug 2025 lifts Asia’s surplus of supply over demand to one-year high.

·         Any extension of pick-up in surplus supply over coming months could prompt adjustment in global trade flows seen so far this year to accommodate the additional volumes.

·         Taiwan’s base oils exports show signs of slowing so far in H1 Oct 2025 vs same period a month earlier.

·         Any more extended slowdown through rest of Oct 2025 would be unusual, after monthly exports consistently stay high so far this year.

·         Singapore’s base oils exports surge over past week to highest weekly volume since Feb 2025.

·         Rise in shipments lifts total exports from domestic sources over last four weeks to highest level since March 2025.

·         Share of exports originating from other sources extends fall to lowest since end-Q1 2025.

·         Any extension of that trend could trigger slowdown in shipments from US and Europe to Singapore.

·         China’s paraffinic base oils output stays higher than usual in Sept 2025 for second month.

·         High output and firm domestic prices to mid-Sept 2025 suggest demand was sufficiently strong to absorb the supplies.

·         Dynamic would curb volume of surplus supplies carried into Q4 2025.

·         Even so, any extension of output at elevated levels in Q4 2025, combined with seasonal slowdown in demand, could trigger rapid rise in inventories.

·         Slowdown in requirements for overseas supplies would help to cushion against such a scenario.

·         Any such slowdown would require weaker domestic base oils prices relative to overseas prices to make the arbitrage less attractive.

·         Any such price-weakness could also make domestic output less attractive.

·         Such a scenario could keep fundamentals more balanced but also sustain China’s requirements for supplies from overseas markets.

·         China’s Group III base oils output rises for second month in Sept 2025 to six-month high.

·         Group III base oils output rises even with domestic Group III prices staying unusually weak relative to Group II prices.

·         Narrow Group III price-premium to Group II base oils incentivizes refiners to produce more Group II base oils instead.

·         Rise in Group III base oils output in Aug-Sept 2025 follows drop in China’s Group III base oils supply from year-earlier levels for three straight months to Aug 2025.

·         Supply slips as fall in imports compounds impact of lower domestic output.

·         Rise in Group III base oils output could point to insufficient domestic availability of supply to meet demand.

·         Any such tightening of supply-demand fundamentals would typically trigger price-reaction.

·         Thailand’s surplus of base oils supply over demand rises to three-year high in Aug 2025.

·         Surplus surges after sharp rebound in Thailand’s base oils output in Aug 2025 following plant-maintenance work.

·         Rise in output triggers rebound in Thailand’s surplus Group I base oils supply to three-year high in Aug 2025.

·         Rise in Singapore’s Group I base oils imports in Sept 2025 adds to surge in Thailand’s surplus Group I supply.

·         Pick-up in Group I supply exceeds Asia’s demand requirements, boosting need to clear surplus volumes from the region.

·         Ex-tank Sharjah Group I SN 500 price-premium to FOB Asia cargo price rises in H1 Oct 2025 to highest level in more two years, facilitating such a scenario.

·         Widening price-premium boosts feasibility of lining up arbitrage shipments to move to Middle East.

·         FOB Asia Group I cargo price-premium to Singapore gasoil holds at level that sustains incentive for refiners to maintain steady output despite recent rise in surplus supply.

·         Margins stay firm even with open arbitrage to Middle East.

·         Dynamic sustains incentive for refiners to maintain  steady-to-firm output so long as demand in Middle East supports prices at higher levels.