Asia base oils supply outlook: Week of 22 April

·        Asia’s base oils supply likely to stay readily available amid signs of steady-to-higher flows from several key exporters.

·        Asia’s Group I and Group II price premium to competing fuel prices rises strongly, adding to incentive for refiners to maintain or increase base oils output at a time when demand is more muted.

·        Arbitrage to move surplus Group II supplies from Asia to outlets like Americas stays hard to work.

·        Less feasible arbitrage opportunities could magnify impact of any build-up of surplus supplies.

·        South Korea’s base oils exports in first three weeks of April 2024 show signs of lagging volumes during same period in March 2024.

·        Slowdown could reflect impact of Group III plant maintenance in South Korea from mid-March 2024.

·        Taiwan’s April base oils exports hold firm, likely to outpace export volumes in March 2024.

·        Singapore’s base oils exports extend recovery since early-April, with strong pick-up in shipments to China and India.

·        Singapore takes delivery of shipment from the Netherlands in the past week.

·        Shipment is first from the Netherlands since Aug 2023.

·        Shipment follows surge in US base oils exports to Singapore in Feb 2024.

·        Any extension of the trend would add to Asia’s base oils supply.

·        South Korea’s March base oils exports rise, with steady flows to SE Asia and unusually large share of supplies moving to India and Middle East.

·        Trend highlights importance of those markets and cushions impact of more muted Chinese demand.

·        Slowdown in China’s demand partly reflects rise in country’s own base oils production capacity.

·        A repeat of that scenario is set to take place over the coming year in India and in southeast Asia.

·        The development could shrink the number of outlets for South Korea’s base oils exports.

·        India’s imports of very-light grade base oils stay lower in March 2024 amid dip in supplies from Spain.

·        Imports could face more pressure after India’s retail diesel premium to CFR India N70 prices fell in April 2024 to its narrowest in five months.

·        The narrower premium often coincides with weaker demand for light-grade base oils.

·        A narrower premium of CFR India Group II prices over US prices also cuts the attraction of arbitrage flows from that market.

·        India's imports from sources like Spain show signs of improving but still taking longer than usual to move to India.

·        Imports from Saudi Arabia also face ongoing logistical issues even though they show signs of continuing for now.