Asia base oils supply outlook: Week of 16 Dec

·         Asia base oils prices stay high vs feedstock/gasoil prices, especially for time of year.

·         Firm base oils margins point to tight supply-demand fundamentals.

·         Firm base oils margins could trigger larger supply-build if fundamentals are weaker than in Q3 2024.

·         Less feasible arbitrage to Americas and Europe keeps more supplies in Asia-Pacific region, boosts reliance on markets like India and Middle East to clear any surplus volumes.

·         US base oils discount to CFR India Group II prices holds steady for past month after widening sharply in Sept-Oct 2024.

·         Steady price discount could limit feasibility and volume of US shipments to markets like India.

·         Asia’s base oils surplus of supply over demand likely rises in Q4 2024 and into early 2025 amid higher supply and lower consumption.

·         Supply likely rises in Q4 2024 following completion of plant maintenance work in Oct 2024.

·         Demand likely falls in Q4 2024 amid seasonal slowdown.

·         Supply already outpaces demand in Oct 2024, even during peak period of plant maintenance work.

·         Dynamic suggests month of September was peak period of regional supply-tightness.

·         Prospect of rising surplus supply increases importance of arbitrage opportunities to remove surplus volumes from the region.

·         Prospect of rising surplus supply increases importance of limiting arbitrage flows from other markets to Asia-Pacific region.

·         Taiwan’s base oils exports stay relatively firm in H1 Dec 2024, after surge in shipments in Nov 2024 and already-firm volumes in Oct 2024.

·         Shipment of larger-than-usual volume of supplies to UAE in Nov 2024 suggests that Asia-Pacific region struggles to absorb the supplies.

·         Singapore’s base oils exports surge in past week, triggering rebound in shipments over last four weeks closer to more typical monthly levels.

·         Singapore takes delivery in past week of more supplies from Italy and Netherlands.

·         Shipments keep base oils imports from Europe at higher levels, especially compared with H1 2024.

·         Shipments from US likely to rise in coming weeks after staying unusually low over past two months.

·         Shipments likely to rise after US base oils exports to Singapore rebound in Oct 2024 following pause in flows in Q3 2024.

·         Rise in shipments follows unusual pick-up in flows in H1 2024, even with muted demand and pick-up in supply in southeast Asia market at year-end.

·         Asia’s Group I base oils exports from Japan, Thailand, and Indonesia combined rise in Oct 2024 to highest since mid-2023.

·         Rise in exports coincides with pick-up in flow of Group I shipments from Europe to southeast Asia in recent months.

·         Asia’s Group I base oils prices hold firm vs feedstock/competing fuel prices even with pick-up in supplies in Q4 2024.

·         Firm margins, even with rise in supply, could point to expectations of tighter supply in coming months because of factors like plant maintenance work.

·         Rise in arbitrage shipments from US to West Africa extend into Q4 2024.

·         Rise in exports to West Africa and surge in shipments to Latin America in Oct 2024 could curb volume of surplus US supplies available for other outlets like India.

·         Trend would extend lower-than-expected flow of arbitrage shipments from US to India during H2 2024.

·         Any signs of lower-than-expected flows from US to markets like India would curb size of any supply-build in Asia-Pacific market at year-end and early next year.