Asia base oils - week of Aug 21: Supply outlook

·        China’s Shandong diesel premium to crude oil holds at three-month high, contrasting with sliding base oils values.

·        Weak base oils margins incentivize more refiners to cut base oils supply, adding to offline production for plant maintenance work.

·        Regional supply shows signs of staying more balanced in Q3 2023, contrasting with large build-up in Q2-Q3 2022.

·        Trend boosts refiners’ leverage when demand gets seasonal boost in coming weeks.

·        China’s base oils output shows signs of falling in August amid wave of shutdowns/delayed plant restarts.

·        Asia’s June base oils exports fall to six-month low; lower shipments could reflect moves by refiners to hold back supplies.

·        Lower exports more likely reflect regional refiners’ lower supply; trend leaves refiners and blenders with lower stocks heading into Q3 2023.

·        Slump in South Korea’s July base oils exports to three-year low partly reflects impact of plant maintenance that drew to a close in July.

·        Size of fall in exports points to run-cuts amongst other refiners at a time when base oils prices were at a discount to diesel.

·        Size of fall in exports could also reflect stock-building ahead of additional plant maintenance work in August.

·        Sustained and sharp fall in base oils exports counters impact of seasonal slowdown in demand, limiting any supply-build.

·        Taiwan’s July base oils exports fall to one-year low, adding to slowdown in regional supplies.

·        Sliding exports counter impact of weak Chinese demand, curb need to redirect supplies to other more distant markets.

·        Sliding exports include ongoing dearth of shipments to Americas, contrasting with pick-up in shipments to that region throughout 2H 2022.

·        Supply in southeast Asia shows signs of holding steadier as refiners tap firmer demand compared with China.

·        South Korea’s July base oils exports to southeast Asia edge down from June, contrasting with slump in its shipments to China.

·        Trend leaves South Korea’s exports to southeast Asia exceeding volumes to China for fourth time in five months.

·        Trend leaves South Korea’s exports to southeast Asia accounting for 28pc share of total volume, up from typical levels of around 22pc.

·        India’s July Group II base oils imports rise to highest in more than two years, with surge in shipments of light grades from Asia and US, and mid-viscosity grades from US.

·        Wave of arbitrage shipments boosts Indian buyers’ inventories well ahead seasonal rise in demand from end-Q3 2023.

·        Indian buyers’ higher stocks could curb urgency to lock in more supplies if prices rise.

·        Wave of Group II mid-viscosity-grade shipments from US reflect that market’s persistent overhang of the product and limited outlets for the supplies.  

·        Singapore’s base oils exports surge in four weeks to mid-August to highest in almost five months.

·        Unusually extreme volatility of Singapore’s base oils exports raises uncertainty about shipments over coming weeks.