Asia base oils supply outlook: Week of 15 September

·         Asia’s base oils prices hold firm versus regional gasoil prices.

·         Sustained strength of base oils margins suggests supply-demand fundamentals remain balanced to tight.

·         Balanced-to-tight fundamentals at end-Q3 would follow signs of smaller-than-usual build-up of surplus supplies in early-Q3.

·         Asia’s surplus of base oils supply over demand rises in July 2025 from previous month.

·         Size of rise in surplus supply remains relatively small and much smaller than year-earlier levels.

·         Including China, Asia’s shortfall of supply versus demand extends into July 2025.

·         Persistent shortfall coincides with unusually firm FOB Asia Group II base oils prices relative to outlets like Americas.

·         Firm base oils margins and closed arbitrage to outlets like Americas could speed up rise in surplus supplies if output rises sharply or demand falls.

·         Such a scenario could materialize in coming months when new production capacity in Asia begins operations and if planned plant-maintenance schedule is lighter than expected.

·         Opposite scenario has instead taken place in recent months, with Asia’s base oils supply continuing to shrink this year.

·         Shrinking supply and persistent shortfall points to need for additional supply.

·         Start-up of new production capacity likely to exceed requirements for additional supply.

·         Even so, ongoing supply-shortfall in Asia could cushion immediate impact of start-up of new production capacity.

·         Singapore’s base oils exports extend rebound over past week, boosting total shipments over past four weeks to highest level in two months.

·         Rise in shipments coincides with expected start-up of new production capacity in island-state during Q3 2025.

·         Singapore’s base oils supply gets further boost from arrival of large shipment from US.

·         Shipment is first in almost two months and largest since April 2025.

·         Shipment adds to arrival of several cargoes from Europe in recent weeks.

·         Shipments help to limit supply-build in US and Europe during summer months, when demand faced seasonal slowdown.

·         Shipments likely to slow down once new production-capacity in Singapore is up and running.

·         Taiwan’s base oils exports stay high in H1 Sept 2025.

·         Firm export volumes follow steady flows to key outlets for term supplies in Aug 2025.

·         Steady flows to term buyers in Aug 2025 contrast with slump in shipments to key outlets for spot shipments such as Middle East.

·         Signs of firm demand in southeast Asia and India likely to support steady requirements for term shipments to those markets at least in Sept 2025.

·         Signs of more muted demand for Group II supplies in Middle East could put pressure on spot shipments from Taiwan to target other outlets instead such as Europe.

·         Taiwan’s base oils exports in Aug 2025 include arbitrage shipment to Europe, consisting mostly of Group II heavy grades.

·         Shipment takes advantage of wide spread between Asia and Europe Group II heavy-grade prices during Q3 2025.

·         Price-spread stays wide in H1 Sept 2025 but starts to narrow from H2 Aug 2025.

·         Any further narrowing of price-spread could complicate moves to line up additional Group II shipments from Asia to Europe.