Asia base oils supply outlook: Week of 15 April

·        Asia’s base oils prices hold firm vs feedstock/competing fuel prices.

·        Firm margins sustain incentive for refiners to maintain output at a time when regional demand is likely to ease.

·        Arbitrage stays hard to work from Asia to Americas and Europe, limiting outlets to more regular markets like India and Mideast Gulf.

·        Conversely, prospect of slowdown in arbitrage shipments from the US to Asia would curb the pace of a supply-build in the region.

·        South Korea’s base oils exports show signs of rising in March 2024, especially to markets like India and Mideast Gulf.

·        South Korea’s base oils exports could be lower in April 2024 because of scheduled plant maintenance work.

·        Exports from Indonesia show signs of rising in March 2024 and April 2024.

·        A rise in shipments from Indonesia would coincide with and help to cover for plant maintenance work in South Korea during that time.

·        Signs of more regular exports from Saudi Arabia to India via the Red Sea add to supplies in that market.   

·        Singapore’s base oils exports rebound last week, extending period of more volatile weekly flows than usual since start of 2024.

·        Singapore’s weekly base oils exports to China rebound last week to highest in almost a month.

·        Singapore’s exports to China over last four weeks stay lower than usual, contrast with firm flows to southeast Asia and especially to India.

·        Lower exports to China and firmer flows to southeast Asia and India mirror similar trend for Taiwan’s exports.

·        Trend suggests Asia’s refiners increasingly already assume that China’s demand will remain more muted, so target other markets instead.

·        Taiwan’s base oils exports show signs of holding firm so far in April 2024.

·        Recovery in Taiwan’s March base oils exports helps to cover seasonal pick-up in demand in southeast Asia and India at end-Q1 2024.

·        Pick-up in shipments to those outlets highlights Taiwan’s reduced reliance on China market, where rising domestic supply and cautious demand curb requirements from other sources.

·        Southeast Asia and India markets may have more difficulty absorbing Taiwan’s shipments in April 2024, when demand typically faces a seasonal slowdown.

·        Indonesia’s Group I base oils exports rise to thirteen-month high in Feb 2024.

·        Exports include a cargo from port of Cilacap for first time in thirteen months.

·        Rise in exports could reflect moves to tap firm Group I prices and tight Group I supply in Asia-Pacific market.

·        Moves suggest Indonesia could be able to boost Group I export volumes with appropriate price incentive.

·        Asia’s February base oils supply falls to lowest since mid-2021, cutting exports and availability ahead of typical seasonal rise in demand in the month of March.

·        Signs of pick-up in Asia’s base oils supply in March 2024 would help to replenish blenders’ depleted stocks.

·        Those inventories are likely to last longer in Q2 2024, when demand typically slows after surge in March.

·        Any continuation of firmer base oils supply in April 2024, combined with more muted demand, raises prospect of build-up of surplus volumes.

·        India set to see pick-up in arrival of arbitrage shipments from US in April 2024 following slowdown in such shipments in March 2024.

·        India’s imports from South Korea show signs of rising in April 2024, slipping in May 2024.

·        India continues to take delivery of more Group I base oils of Russian origin in April 2024.

·        Shipments follow delivery of more than 8,000 tonnes of Group I heavy grades of Russian origin in March 2024.

·        CFR India Group I SN 500 premium to FOB Asia prices stays lower than throughout 2023.

·        Trend suggests Group I heavy-neutrals supplies from sources like Russia cover more requirements, curbing need to keep open the arbitrage from Asia.

·        India’s shipments from Russia in March and April 2024 also include steady flow of Group III 6cSt base oils.

·        India takes delivery of large cargo of Group II base oils from Taiwan in H1 April 2024; more than half the shipment consists of heavy grades.