· China’s Shandong diesel premium to crude oil edges down after strong rebound since late June 2023..· Firm premium incentivizes refiners to prioritise diesel production over base oils.· India’s retail diesel premium to crude oil falls to lowest since Nov 2022, stays unusually firm for crude oil supplies at discounted prices..· Asia’s Q2 2023 base oils supply falls by more than 300,000t from Q1 2023..· Drop in supply counters slowdown in Q2 2023 lube consumption vs Q1 2023, limits supply-surplus ahead of further demand slowdown during Q3 2023.· Recovery in Asia’s Q3 2023 base oils supply likely to be more muted amid additional plant shutdowns, run-cuts, and slow recovery in China’s base oils output..· China’s August base oils output likely to be impacted by additional plant maintenance work. · Weak lube demand complicates Chinese refiners’ moves to raise prices in response to higher feedstock costs – incentivizing run-cuts.· China’s paraffinic base oils output dips to four-month low in July, falls below year-earlier levels..· Base oils output falls amid additional plant maintenance work and weak margins.· Fall in base oils output suggests China’s economic recovery stays muted in Q3 2023.· Fall in base oils output suggests regional refiners can absorb weaker margins more effectively than Chinese refiners.· Regional refiners better able to absorb weaker margins as their wider customer base allows for strength in some markets to counter weakness in others.· Chinese refiners’ reliance on domestic market leaves them more exposed to weakness in that market.· China’s imposition of consumption tax on industrial white oils in early July slashes their competitiveness versus base oils – raising prospect of some domestic refiners switching to other products more permanently.· China’s low base oils output eases concern of surge in additional base oils supply in Asia-Pacific this year following ending of country’s zero-Covid policies at end-2022.· China’s low base oils output vs year-earlier levels instead raises prospect of firmer demand for supplies from regional refiners.· China’s total July base oils supply shows signs of slumping as imports fail to counter fall in base oils output..· Drop in supply suggests blenders preferred to maintain low stocks, raising prospect of stronger pick-up in demand during shorter time period ahead of seasonal rise in demand in late Q3 2023..· Base oils output in other markets in Asia stays steady-to-low through Q2 2023 even with lower-than-expected output in China.· Thailand’s June base oils output rises to three-month high, holds in narrow range.· Thailand’s 1H 2023 base oils output stays much lower than 1H 2022 levels..· Higher June output coincides with firm Asia base oils margins in Q2 2023 and open arbitrage to India, Mideast Gulf and Europe.· Steady output and regular arbitrage flows curb size of supply-build in Thailand ahead of seasonal slowdown in demand in Q3 2023.· Thailand's supply surplus still jumps to ten-month high in June in face of increasingly weak domestic demand..· Seasonal slowdown in demand in Q3 2023 and weaker regional base oils margins incentivize Thailand’s refiners to trim output to maintain supply-demand balance. .· South Korea’s June base oils output falls 30pc yoy to lowest in more than two years..· Size of fall in output exceeds production capacity of plant taken offline for maintenance work.· Size of fall in output suggests other South Korean refiners also cut production in June.· Size of fall in output cuts regional supply-build ahead of seasonal slowdown in Q3 2023.· Output likely partially recovered in July following completion of maintenance work; weak base oils margins sustain incentive for refiners to maintain lower output..· Singapore’s base oils exports slump last week to unusually low levels..· Fall in shipments points to either logistical issues that would likely trigger a rebound in exports this week, or production issues that would likely take longer to trigger a rebound in exports..· Indonesia’s Group III base oils exports stay lower than usual throughout 2Q 2023, with slump in flows to South Korea especially..· Indonesia’s lower Group III exports in 2H 2022 exacerbated global supply tightness at the time.· Indonesia’s lower Group III exports in 1H 2023 coincide with plant maintenance in Europe, still do little to ease signs of growing supply surplus..Global base oils - week of Aug 14: Price outlook - margins
· China’s Shandong diesel premium to crude oil edges down after strong rebound since late June 2023..· Firm premium incentivizes refiners to prioritise diesel production over base oils.· India’s retail diesel premium to crude oil falls to lowest since Nov 2022, stays unusually firm for crude oil supplies at discounted prices..· Asia’s Q2 2023 base oils supply falls by more than 300,000t from Q1 2023..· Drop in supply counters slowdown in Q2 2023 lube consumption vs Q1 2023, limits supply-surplus ahead of further demand slowdown during Q3 2023.· Recovery in Asia’s Q3 2023 base oils supply likely to be more muted amid additional plant shutdowns, run-cuts, and slow recovery in China’s base oils output..· China’s August base oils output likely to be impacted by additional plant maintenance work. · Weak lube demand complicates Chinese refiners’ moves to raise prices in response to higher feedstock costs – incentivizing run-cuts.· China’s paraffinic base oils output dips to four-month low in July, falls below year-earlier levels..· Base oils output falls amid additional plant maintenance work and weak margins.· Fall in base oils output suggests China’s economic recovery stays muted in Q3 2023.· Fall in base oils output suggests regional refiners can absorb weaker margins more effectively than Chinese refiners.· Regional refiners better able to absorb weaker margins as their wider customer base allows for strength in some markets to counter weakness in others.· Chinese refiners’ reliance on domestic market leaves them more exposed to weakness in that market.· China’s imposition of consumption tax on industrial white oils in early July slashes their competitiveness versus base oils – raising prospect of some domestic refiners switching to other products more permanently.· China’s low base oils output eases concern of surge in additional base oils supply in Asia-Pacific this year following ending of country’s zero-Covid policies at end-2022.· China’s low base oils output vs year-earlier levels instead raises prospect of firmer demand for supplies from regional refiners.· China’s total July base oils supply shows signs of slumping as imports fail to counter fall in base oils output..· Drop in supply suggests blenders preferred to maintain low stocks, raising prospect of stronger pick-up in demand during shorter time period ahead of seasonal rise in demand in late Q3 2023..· Base oils output in other markets in Asia stays steady-to-low through Q2 2023 even with lower-than-expected output in China.· Thailand’s June base oils output rises to three-month high, holds in narrow range.· Thailand’s 1H 2023 base oils output stays much lower than 1H 2022 levels..· Higher June output coincides with firm Asia base oils margins in Q2 2023 and open arbitrage to India, Mideast Gulf and Europe.· Steady output and regular arbitrage flows curb size of supply-build in Thailand ahead of seasonal slowdown in demand in Q3 2023.· Thailand's supply surplus still jumps to ten-month high in June in face of increasingly weak domestic demand..· Seasonal slowdown in demand in Q3 2023 and weaker regional base oils margins incentivize Thailand’s refiners to trim output to maintain supply-demand balance. .· South Korea’s June base oils output falls 30pc yoy to lowest in more than two years..· Size of fall in output exceeds production capacity of plant taken offline for maintenance work.· Size of fall in output suggests other South Korean refiners also cut production in June.· Size of fall in output cuts regional supply-build ahead of seasonal slowdown in Q3 2023.· Output likely partially recovered in July following completion of maintenance work; weak base oils margins sustain incentive for refiners to maintain lower output..· Singapore’s base oils exports slump last week to unusually low levels..· Fall in shipments points to either logistical issues that would likely trigger a rebound in exports this week, or production issues that would likely take longer to trigger a rebound in exports..· Indonesia’s Group III base oils exports stay lower than usual throughout 2Q 2023, with slump in flows to South Korea especially..· Indonesia’s lower Group III exports in 2H 2022 exacerbated global supply tightness at the time.· Indonesia’s lower Group III exports in 1H 2023 coincide with plant maintenance in Europe, still do little to ease signs of growing supply surplus..Global base oils - week of Aug 14: Price outlook - margins
