Asia base oils supply outlook: Week of March 18

·        Asia’s base oils supply likely to stay mixed, depending on the grade.

·        Less feasible arbitrage to outlets like China and more distant markets like Americas point to still-limited surplus supply for now.

·        Less feasible arbitrage to outlets outside the region suggest surplus volumes could build up fast if regional supply improves and demand slows.

·        Taiwan’s base oils exports show signs of revival in recent days after staying lower than usual in H1 March 2024.

·        South Korea’s Group II supply expected to rise in March 2024 after slowdown in shipments in Feb 2024.

·        South Korea’s Group III supply set to fall because of scheduled plant maintenance work.

·        Recent shipments from Mideast Gulf and Russia boost Group I supply in India.

·        Singapore’s base oils exports rebound last week, boosting volumes over last four weeks to more typical levels to markets like China and India.

·        Singapore so far avoids repeat of surge in exports to China that it saw in March 2023.

·        Steady exports to China in recent weeks raise prospect of avoiding major supply-build in that market.

·        Asia’s firm base oils prices relative to gasoil and relative to other markets suggest the region’s supply-demand fundamentals remain balanced to tight for now.

·        Fundamentals stay balanced even after Asia’s January base oils supply rises to five-month high.

·        Stronger demand matches rise in supply, leaving surplus supply lower than usual at start of 2024.

·        Asia’s base oils exports show signs of slipping in Feb 2024 after rising to a four-month high in Jan 2024.

·        Slowdown in Asia’s exports in Feb 2024 would extend firm supply-demand fundamentals through most of Q1 2024.

·        South Korea’s February base oils exports fall to three-month low, adding to signs of drop in regional exports.

·        Group I base oils exports from Japan, Thailand and Indonesia combined fall to multi-year low in Jan 2024.

·        Group I exports set to stay lower than usual over the coming months because of structural fall in supply in Japan.

·        Trend incentivizes blenders to switch as much as possible to using other base oils grades in place of Group I.

·        Asia’s share of US Group III base oils imports trends lower in Jan 2024 and over past year.

·        Trend increases importance of boosting demand in other markets instead of US.

·        Other markets include Europe, where demand is weak; China, which is increasingly self-sufficient; and India, which will be more self-sufficient over the coming year.

·        Trend leaves southeast Asia as key outlet for regional Group III supplies.

·        Singapore takes delivery of large volume of base oils in past week, including unusually large shipments from Hong Kong and US.

·        Singapore’s base oils imports from China also get a boost.

·        India’s February base oils imports extend fall to four-month low on dip in arbitrage shipments from US and lower premium-grade supplies from Mideast Gulf.

·        Drop in shipments follows rise in Indian buyers’ stocks, fall in domestic demand at end-2023 and early 2024.

·        Drop in imports coincides with prospect of dip in supplies from Saudi Arabia and signs of slowdown in shipments from Taiwan to India in coming weeks.

·        Prospect of slowdown in shipments from regular suppliers, as well as increasingly competitive US prices, boost attraction of securing more supplies from US.

·        India’s February imports of Group I base oils from Russia and Mideast Gulf stay higher than usual, more than covering for slowdown in shipments from Thailand.