Asia base oils supply outlook: Week of April 1

·        Asia’s base oils supply shows signs of more ready availability, with firm demand in markets like India absorbing more volumes for now.

·        Arbitrage to move supplies from Asia to markets like the Americas and Europe stays hard to work, pointing to limited surplus for now.

·        FOB NE Asia Group II light-grade premium to CFR NE Asia and CFR India prices falls sharply in recent weeks.

·        Narrower premium complicates arbitrage to those markets.

·        Ex-tank Singapore Group I brightstock premium to FOB Europe export prices falls to lowest since start of 2024.

·        Narrowing premium raises prospect of curbing flow of additional arbitrage supplies from Europe to Asia.

·        China’s base oils supply shows signs of holding firm through March 2024.

·        Base oils exports from Taiwan rebound strongly from H2 March 2024.

·        Base oils exports from South Korea show signs of rising to China and rebounding to India in March 2024.

·        Base oils exports from Singapore show signs of recovering to more typical levels in March 2024 after unusual dip in Feb 2024.

·        Steady-to-higher supply in Asia would coincide with likely slowdown in regional lube demand at start of Q2 2024.

·        Rise in supply and slower demand raises prospect of a faster rise in regional surplus supplies during Q2 2024.

·        Singapore’s February base oils exports unexpectedly fall at a time of year when they usually rise.

·        Exports usually rise to meet seasonal pick-up in Asia’s lube demand at end of first quarter of the year.

·        Drop in exports instead compounds impact of slowdown in shipments from Taiwan and South Korea that month.

·        Drop in exports from Asia’s key suppliers likely to leave region with smaller surplus heading into Q2 2024, when demand usually eases compared with the month of March.

·        Singapore’s base oils imports from China show signs of recovering in March 2024.

·        Singapore takes delivery of additional shipments from Hong Kong and Qatar last week.

·        Shipments trigger unusual surge in Singapore’s imports from Hong Kong and Qatar in March 2024.

·        Qatar is key source of Group III+ GTL base oils; Hong Kong is a key distribution point for Qatar’s GTL base oils.

·        Singapore takes delivery of rare cargo from Japan last week.

·        Shipment is first from Japan since Oct 2023, when a Group I plant in the country was closed.

·        Pause in shipments from Japan since then added to tighter availability of Group I base oils in southeast Asia. 

·        Singapore’s Group I base oils imports become more reliant on shipments from Europe and Russia than from Asia in recent months.

·        The trend leaves Singapore more reliant on supplies that can take several months instead of several weeks to arrive.

·        The trend could change again following likely closure of a Group I plant in Europe in the coming weeks.

·        India’s February base oils supply falls to five-month low as domestic output slides to lowest since mid-2022.

·        Excluding imported supplies of very-light grade base oils, India’s supply shortfall versus demand widens to more than 80,000 tonnes in Feb 2024, from around 20,000 tonnes the previous month.

·        Larger shortfall coincides with pick-up in India’s demand for overseas supplies in recent weeks.