· China’s Shandong diesel premium to crude oil steadies, stays lower than usual.· China's discounted prices for some crude oil supplies could compensate for lower diesel values and slow moves to cut refinery run-rates.· India’s retail diesel premium to crude oil prices stay at levels that incentivize refiners to maintain high run-rates. · Addition of China’s consumption tax on domestic industrial white oils cuts their competitiveness vs base oils.· Trend likely to reduce domestic refiners’ incentive to produce white oils.· Several Chinese refiners start maintenance work in June-July 2023 lasting from several weeks to several months.· Some new production capacity expected to start-up in China later in Q3 2023.· Some plant maintenance in South Korea set to end in July 2023. Some plant maintenance set to begin in August 2023.· Weaker base oil margins and less feasible arbitrage opportunities to Americas add to refiners’ incentive to trim output.· Taiwan’s base oils supply shows signs of staying low in July, several months before scheduled plant maintenance work.· Asia’s May base oils supply edges up from April, stays lower than Q1 2023 levels as plant maintenance in Q2 2023 gathers pace.· Asia’s May base oils exports dip to five-month low; April-May exports fall more steeply than during Q2 2022..· Dip in exports likely extends into June 2023.· Lower exports contrast with rising supply in May, suggesting refiners built stocks ahead of plant maintenance work. · Lower exports coincide with signs of firmer demand in southeast Asia.· Lower exports and firmer demand leaves Asia-Pacific market relatively well balanced at start of Q3 2023.· Refiners would need to manage supply carefully during Q3 2023 to sustain supply-demand balance – weaker margins incentivize such a move.· Sustained slowdown in Indonesia’s Group III base oils exports shows little signs of changing..· Indonesia is a key source of Group III+ base oils with approvals.· Prospect of continuation of unpredictable and lower supply and higher prices increases incentive for blenders to seek alternatives instead.· Indonesia’s Group I exports stay low in May, reflecting firm domestic demand, sufficient regional supply and weak Chinese buying interest.· Indonesia’s Group I exports have tended to rise when export prices climb to levels that incentivize higher base oils production.· There are few signs of such a rise in export prices in the coming months.· Singapore’s base oils exports rebound last week after slumping in first week of July.· Unusual volatility in export volumes points to logistical rather than plant-related issues.· Rising shipments to Indonesia and India over past month contrast with slowdown in shipments to China..· India’s base oils supply gets boost from arrival of wave of arbitrage shipments in June, including sustained flow of shipments from US..· Arbitrage flows from US extend into July.· Trend reflects Indian market’s ability to absorb unusually large volumes, especially compared with other markets.· Healthy stocks, ongoing arbitrage flows and weaker demand during monsoon season curb Indian buyers’ urgency to lock in more supplies.· Price-pressure from higher feedstock costs and seasonal rise in demand from late September likely to boost interest in supplies deemed to be competitive..Global base oils - week of July 17: Price outlook - margins
· China’s Shandong diesel premium to crude oil steadies, stays lower than usual.· China's discounted prices for some crude oil supplies could compensate for lower diesel values and slow moves to cut refinery run-rates.· India’s retail diesel premium to crude oil prices stay at levels that incentivize refiners to maintain high run-rates. · Addition of China’s consumption tax on domestic industrial white oils cuts their competitiveness vs base oils.· Trend likely to reduce domestic refiners’ incentive to produce white oils.· Several Chinese refiners start maintenance work in June-July 2023 lasting from several weeks to several months.· Some new production capacity expected to start-up in China later in Q3 2023.· Some plant maintenance in South Korea set to end in July 2023. Some plant maintenance set to begin in August 2023.· Weaker base oil margins and less feasible arbitrage opportunities to Americas add to refiners’ incentive to trim output.· Taiwan’s base oils supply shows signs of staying low in July, several months before scheduled plant maintenance work.· Asia’s May base oils supply edges up from April, stays lower than Q1 2023 levels as plant maintenance in Q2 2023 gathers pace.· Asia’s May base oils exports dip to five-month low; April-May exports fall more steeply than during Q2 2022..· Dip in exports likely extends into June 2023.· Lower exports contrast with rising supply in May, suggesting refiners built stocks ahead of plant maintenance work. · Lower exports coincide with signs of firmer demand in southeast Asia.· Lower exports and firmer demand leaves Asia-Pacific market relatively well balanced at start of Q3 2023.· Refiners would need to manage supply carefully during Q3 2023 to sustain supply-demand balance – weaker margins incentivize such a move.· Sustained slowdown in Indonesia’s Group III base oils exports shows little signs of changing..· Indonesia is a key source of Group III+ base oils with approvals.· Prospect of continuation of unpredictable and lower supply and higher prices increases incentive for blenders to seek alternatives instead.· Indonesia’s Group I exports stay low in May, reflecting firm domestic demand, sufficient regional supply and weak Chinese buying interest.· Indonesia’s Group I exports have tended to rise when export prices climb to levels that incentivize higher base oils production.· There are few signs of such a rise in export prices in the coming months.· Singapore’s base oils exports rebound last week after slumping in first week of July.· Unusual volatility in export volumes points to logistical rather than plant-related issues.· Rising shipments to Indonesia and India over past month contrast with slowdown in shipments to China..· India’s base oils supply gets boost from arrival of wave of arbitrage shipments in June, including sustained flow of shipments from US..· Arbitrage flows from US extend into July.· Trend reflects Indian market’s ability to absorb unusually large volumes, especially compared with other markets.· Healthy stocks, ongoing arbitrage flows and weaker demand during monsoon season curb Indian buyers’ urgency to lock in more supplies.· Price-pressure from higher feedstock costs and seasonal rise in demand from late September likely to boost interest in supplies deemed to be competitive..Global base oils - week of July 17: Price outlook - margins