Asia base oils supply outlook: Week of 18 Nov

·        Asia’s base oils price premium to feedstock/competing fuel prices holds at firm levels, especially for heavy grades.

·        Firm base oils margins incentivize refiners to maintain or raise output even with seasonal slowdown in demand and prospect of improvement in supply.

·        Such a move could increase size of any mismatch between supply and demand.

·        Arbitrage to move supplies from Asia to more distant regions like US and Europe gets harder to work.

·        Arbitrage to move supplies from other regions like US to markets like India turn increasingly feasible.

·        US Group II export price discount to CFR India price deepens to widest level since May 2024.

·        Wider discount boosts feasibility of pick-up in arbitrage shipments from US to India.

·        Asia’s base oils supply should get further boost over coming weeks following completion of plant maintenance work in South Korea at end-Oct 2024.

·        Higher output in South Korea should support firm base oils exports in Nov 2024, after exports already rebound in Oct 2024.

·        Rebound in South Korea’s exports in Oct 2024 suggests market impact of plant maintenance work peaked in Sept 2024, even as shutdown mostly took place in Oct 2024.

·        South Korea’s exports slumped to lowest in more than a decade in Sept 2024 amid signs of stock-building ahead of shutdown.

·        Earlier-than-expected rebound in supplies from South Korea in Q4 2024 would coincide with seasonal slowdown in regional demand.

·        Base oils exports from South Korea, Taiwan and Singapore to China show signs of rising in Oct 2024 from previous month.

·        Those markets typically account for more than 70% of China’s monthly base oils imports.

·        Rise in shipments points to pick-up in China’s imports in Oct 2024.

·        Such a move would add to surge in China’s domestic output, triggering large rise in supply in Oct 2024.

·        Higher supply and seasonal slowdown in demand could boost incentive for China’s refiners to adjust output to limit large supply-build and to ease any pressure on prices.

·        Singapore’s base oils exports show signs of holding steadier in narrower range in recent weeks.

·        Shipments hold at relatively lower levels to key outlets of southeast Asia, China and India.

·        Any extension of that trend could partially counter impact of expected revival in South Korea’s base oils output in Nov 2024 and firm export volumes from the country.

·        Singapore’s four-week base oils imports fall to lowest level in more than five months.

·        Slowdown in shipments could further crimp speed of expected pick-up in Asia’s base oils supply.

·        Taiwan’s exports in Nov 2024 get boost from shipments delayed from Oct 2024.

·        Besides delayed shipments, volume of new cargoes for loading in Nov 2024 stays relatively low so far this month.

·        Taiwan’s base oils exports to southeast Asia rebound in Oct 2024.

·        Rise in shipments to markets like Indonesia, Philippines and Pakistan add to competition for market share in all those outlets.

·        Singapore and South Korea are the largest sources of overseas premium-grade supplies in most of those markets.

·        Competition for market share likely to intensify as new production capacity comes on line in Singapore and India in coming year.

·        Large cargo from Saudi Arabia set to reach Pakistan in coming week.

·        Pakistan’s imports from Saudi Arabia slumped during last two years.

·        Any pick-up in shipments from Saudi Arabia to Pakistan would boost country’s supply, add to growing competition for larger share of country's imports.