Asia base oils supply outlook: Week of 19 Aug

·        Asia’s base oils prices stay unusually firm relative to regional gasoil prices, especially for the time of year.

·        High margins point to still-firm supply-demand fundamentals.

·        Asia’s base oils supply could slip in Aug 2024 from previous month amid signs of slowdown in shipments from Singapore and Taiwan.

·        Supply could be trimmed further as open arbitrage to Americas sustains incentive to move more shipments to that region.

·        Singapore’s base oils exports over last four weeks extend slowdown vs July 2024, especially to India and southeast Asia.

·        Taiwan’s base oils exports show signs of slowing sharply this month from July 2024, although more cargoes move to China.

·        Pick-up in shipments could point to tighter supply and ongoing demand from domestic buyers that have less flexibility to switch to other suppliers in the short term.

·        Slowdown in Taiwan's shipments this month follow rise in exports to six-month high in July 2024 amid surge in shipments to southeast Asia, India and UAE.

·        This month's rise in shipments to China comes after Taiwan's July base oils exports to China account for less than 25% of its total shipments for a second month.

·        Any extension of that trend would add to competition for market share in key southeast Asian outlets like Indonesia.

·        Drop in Taiwan’s shipments to China in June-July 2024 coincides with and could be a factor supporting wider gap between domestic Chinese Group II prices and FOB NE Asia prices.

·        South Korea’s base oils exports stay lower than usual in July 2024 even as they improve from June 2024.

·        Exports stay lower than usual even as South Korea’s base oils output holds stays high in May-June 2024.

·        Diverging trend points to build-up of surplus supplies or diversion of some of the supplies into the diesel pool.

·        Signs of stock-building would precede the planned shutdown of a key Group II base oils unit in South Korea starting in Sept 2024.

·        Any such stock-building would cushion the impact of the plant maintenance work.