Asia base oils supply outlook: Week of 23 Sept

·        Asia’s Group I/II heavy-grade prices stay unusually high relative to gasoil prices.

·        Sustained price-strength points to tight supply even with refiners incentivized to increase base oils output.

·        Asia’s base oils supply from regional refiners shows signs of staying lower than usual so far in Sept 2024.

·        Start or continuation of regional plant shutdowns set to curb output over coming weeks.

·        Closed arbitrage from US continues to curb flow of additional arbitrage shipments from that market to Asia. 

·        Signs of additional arbitrage shipments from Asia to Americas in Sept 2024 curbs further size of any surplus volumes.

·        Arbitrage to Americas could get harder to work as falling US prices increase risk of lining up additional shipments to that market.

·        Sustained flow of shipments from US and Europe to southeast Asia in Sept 2024 cushions impact of lower supply.

·        Singapore’s four-week base oils exports extend recovery in mid-Sept 2024, mostly because of surge in re-exports to highest since early-June 2024.

·        High re-export volume in early-June 2024 coincided with high domestic base oils exports at that time.

·        High re-exports in mid-Sept 2024 coincide with unusually low domestic exports.

·        Contrasting trends trigger rise in re-exports as share of Singapore’s total exports to highest since Nov 2023.

·        Rise in Singapore’s re-exports follows surge in island-state’s base oils imports in recent weeks.

·        Imports include arrival in past week of largest shipment from Italy since start of 2024.

·        Shipment follows delivery of cargoes from Netherlands and US the previous week.

·        Shipments move to Singapore despite closed arbitrage from US and Europe to Asia.

·        South Korea’s base oils exports rise to eighteen-month high in Aug 2024.

·        Rebound in exports helps to remove build-up of surplus volumes after shipments lag South Korea’s rising base output during the previous two months.

·        Asia’s base oils prices extend rise vs feedstock/competing fuel prices during Q3 2024 even with surge in South Korea’s base oils exports.

·        Sustained price strength implies balanced-to-tight fundamentals, which points to tighter supply from other sources.

·        Removal of large portion of South Korea’s surplus volumes in Aug 2024 cuts supply-buffer to cover for planned shutdown of one of the country’s key base oils unit from Sept 2024.

·        Shutdown of base oils unit, and subsequent drop in output over coming weeks, duly likely to have larger impact on regional supply during that period.

·        Taiwan’s base oils exports show signs of reverting to more typical levels in Sept 2024, following surge in shipments during each of previous two months.

·        China’s base oils exports show signs of slowing ahead of upcoming closure of major Group I plant in the country in Oct 2024.

·        Japan’s base oils exports show signs of slowing in recent weeks.

·        Slowdown points to tighter supply following unplanned shutdown of key base oils unit in Japan since early July 2024.