Asia base oils supply outlook: Week of 23 June

·         Asia’s base oils price-premium to competing/feedstock prices extends fall to five-month low.

·         Lower margins coincide with improving supply in Asia as more plant-maintenance draws to a close.

·         Improving supply and seasonal slowdown in demand could curb refiners’ leverage to target higher prices to reverse recent drop in margins.

·         Improving supply, seasonal slowdown in demand and lower margins instead boost incentive for refiners to adjust output.

·         Such a move would help to sustain more balanced fundamentals.

·         Increasingly narrow price-premium to diesel for light grades especially could trigger such an adjustment in output.

·         Margins for heavy grades remain high, curbing pressure to adjust output of those grades.

·         Group I heavy-neutrals supply could tighten because of upcoming plant-maintenance in southeast Asia and any extended slowdown in exports from Iran.

·         Ex-tank UAE Group I SN 500 price-premium to FOB Asia cargo price rises to widest level in more than a year, reflecting concern about that dynamic.

·         Any extension of trend would make arbitrage shipments to Middle East more feasible.

·         Any sustained strength in Group I prices would boost attraction of using more Group II heavy grades instead.

·         Scenario could prolong already-extended price-strength of Group II heavy-grade base oils.

·         Taiwan’s base oils exports see slowdown over past week, raising prospect of its total shipments this month falling from May 2025.

·         Singapore’s base oils exports over last four weeks hold steady, close to more typical levels.

·         Exports get support from sustained pick-up in re-exports of supplies that originated from other markets.

·         Exports from other markets could face slowdown amid sustained drop in shipments from US and Europe over past two months.

·         Singapore could see revival in delivery of shipments from US and Europe in coming weeks following completion of most plant maintenance work in those markets and pick-up in their exports to Singapore.

·         South Korea’s base oils exports stay low in May 2025 for fifth time in six months.

·         Persistently-low exports keep supply fundamentals in Asia more balanced for longer.

·         Low exports earlier this year likely had larger impact on Group II supplies.

·         Dynamic likely had larger impact on markets like southeast Asia and Middle East.

·         South Korea’s low exports in May 2025 likely had larger impact on Group III supplies, reflecting impact of maintenance work on Group III unit that month.

·         Dynamic likely to have larger impact on more distant markets like US.

·         Sustained fall in South Korea’s base oils exports to southeast Asia contrasts with rise in shipments from Singapore to southeast Asia in first five months of 2025.

·         Trend leaves shipments from Singapore accounting for growing share of supplies in southeast Asia, while South Korea's share dwindles.

·         Trend could gather pace over coming months following expected start-up of new production capacity in Singapore.

·         Extension of trend could put pressure on South Korea's refiners to adjust prices to boost competitiveness of their supplies, or to target other markets instead.

·         Base oils exports to southeast Asia from South Korea, Singapore and Taiwan combined hold close to ten-month high in May 2025.

·         Firm exports likely keep blenders’ inventories at healthy levels.

·         Blenders’ healthy stocks could curb any urgency to seek additional volumes if supply were to face unexpected disruptions.