Asia base oils supply outlook: Week of 14 Oct

·        Asia’s base oils prices extend slide vs feedstock/competing fuel prices.

·        Any extension of trend would incentivize refiners to consider adjusting production plans.

·        Any such moves would keep Asia’s supply surplus lower for longer.

·        Arbitrage to move shipments from US to Asia improves but stays hard to work.

·        Still-limited arbitrage opportunities contrast with expectations that arb would be more feasible in Q4 2024.

·        Less feasible arbitrage opportunities add to signs of more limited surplus supply in Asia-Pacific region.

·        More limited surplus supply gives refiners more leverage to target prices that maintain margins at recent levels.

·        Singapore’s base oils exports over past four weeks show signs of steadying at more typical levels after unusually volatile flows in July-Aug 2024.

·        Singapore takes delivery of larger-than-usual shipment from Saudi Arabia in past week.

·        Shipment adds to pick-up in flows from Saudi Arabia to Singapore in H2 2024.

·        Taiwan’s base oils exports show signs of recovering to more typical levels so far in Oct 2024, after surge in shipments in July-Aug 2024 followed by dip in exports in Sept 2024.

·        Plant maintenance in South Korea and Japan and lower exports from Taiwan in Sept 2024 raise prospect of cutting regional supply to multi-month low.

·        Any significant recovery in output unlikely before Nov 2024.

·        South Korea’s base oils output holds firm and in narrow range in Aug 2024, contrasts with surge in exports that month.

·        South Korea’s net supply duly flips to deficit in Aug 2024 for first time in three months, and to largest deficit in five months.

·        South Korea’s tighter supply raises prospect of curbing its ability to maintain steady exports during plant maintenance work in Sept-Oct 2024.

·        Dynamic puts onus on buyers to tap stocks or line up other sources to cover requirements.

·        Thailand’s Group I base oils output holds in Aug 2024 at second-highest level in nineteen months.

·        Surplus of output vs domestic and overseas demand still falls in Aug 2024 to lowest level in at least six months.

·        Trend highlights growing demand for Thailand’s base oils and pressure on output staying higher to cover that demand.

·        Growing importance of Thailand’s Group I base oils highlights slump in Asia’s Group I base oils production capacity in recent years.

·        Recent dip in Asia’s Group I base oils margins, especially for light grades, could incentivize Thailand’s refiners to trim base oils output.