· Asia’s base oils supply stays relatively balanced at a time of year when market often faces surplus volumes.· Asia base oils supply likely to improve from Dec 2023 following restart of Taiwan’s Group II unit.· Arbitrage to move Group II supplies from Asia to Europe stays less attractive than last year.· Arbitrage to move Group II supplies from Asia to Americas gets harder amid more competitive US prices.· Less feasible arbitrages point to relatively balanced supply so far in Q4 2023.· That dynamic could change after Taiwan’s base oils exports resume.· Rise in China’s domestic base oils supply could have limited impact on regional market after Asia’s refiners already redirected more supplies to other markets this and last year..· South Korea’s October base oils exports rebound to eight-month high..· Rise in shipments covers for drop in supplies from Taiwan.· Rise in shipments would need to continue through Nov 2023 to extend that cover, with Taiwan’s Group II unit set to resume operations in Dec 2023.· Rise in shipments coincides with restart of several base oil units in China in Nov 2023.· A further rise in base oils supply in China would likely leave more supplies from South Korea targeting other markets instead..· Asia’s surplus of base oils supply over demand falls in Sept 2023, slashing size of surplus in Q3 2023..· Size of Q3 2023 supply surplus falls by more than half yoy.· Smaller surplus curbs refiners’ need to adjust prices to make arbitrage feasible to other regions.· Smaller surplus precedes plant maintenance work and plant closure in region in Q4 2023.· Trend likely to leave regional supply more balanced through Q4 2023..· Taiwan’s October base oils exports fall to lowest since Sept 2021 because of plant maintenance work..· Size of fall in exports suggests refiner built limited stocks ahead of the shutdown.· Size of fall in exports and refiner’s limited stocks magnifies impact of the shutdown.· Drop in Taiwan’s Group II supplies in Q4 2023 keeps regional supply relatively balanced, limits need for regional refiners to target other markets with arbitrage shipments. .· Taiwan’s October base oils exports to SE Asia/India slump to two-year low..· Almost complete pause in exports to Singapore coincides with slowdown in supplies from Japan to the island-state.· Pause in exports to India coincides with drop in arbitrage shipments from US to India.· Drop in exports likely boosts demand for supplies from South Korea in Q4 2023 to cover shortfall..· Singapore’s base oils imports from Japan extend pause through Nov 2023, cutting four-week supply to lowest in end-2021..· Drop in imports from Japan increases need for alternative Group I base oils supplies.· Tighter Group I supply in southeast Asia could curb flow of arbitrage shipments to markets outside the region..· India’s October base oils imports hold steady as rising volumes from Mideast Gulf balance out slowdown in shipments from South Korea, Taiwan, US..· Pick-up in supplies from other markets highlights ready availability of alternative sources and need for sellers to maintain competitive prices to keep open the arbitrage to India.· Narrowing cfr India Group I base oil premium to Asia prices could impact flow of arbitrage shipments to the country from Asia..Global base oils - week of Nov 20: Demand outlook
