Asia base oils - week of April 24: Supply outlook

·        India’s retail diesel premium to discounted crude oil stays high, incentivizing refiners to maintain high run-rates.

·        China’s diesel premium to crude holds firm, even firmer vs discounted crude.

·        China’s diesel demand likely to get seasonal boost amid pick-up in agricultural, construction activity.

·        Plant maintenance work throughout Asia-Pacific in Q2 2023 likely to impact trade flows, sustain firmer Chinese demand for overseas supplies.

·        Planned plant maintenance work in Japan raises prospect of drop in exports – contrasting with pick-up in shipments to Singapore in recent weeks.

·        South Korea’s March base oils exports stay firm even as they fall from February.

·        South Korea’s Q1 exports rise to highest in more than a year – but regional prices relative to diesel still rise in Q1 2023.

·        Rising supply and firm prices suggest demand growth outpaced supply.

·        Firm base oils prices sustain incentive for South Korean refiners to maintain higher output and exports.

·        Trend would likely coincide with weaker demand compared with late Q1 2023.

·        Large volume of South Korea’s surplus supplies move westwards to Mideast Gulf and Africa in Q1 2023.

·        Rise in shipments to those markets contrasts with large arbitrage shipments to Americas in 2H 2022.

·        Northeast Asia’s arbitrage shipments in 2H 2022 had bigger impact on US suppliers.

·        Arbitrage shipments in Q1 2023 have impact on European and Mideast Gulf suppliers, as well as US.

·        South Korea’s heavy-grade shipments to Latin America stay competitive even as large volumes move to Mideast Gulf.

·        Large flows to different markets suggest heavy-grade supply remained plentiful.

·        Asia’s February base oils supply falls to four-month low even as exports rise to 15-month high and demand to four-month high.

·        Trend cuts surplus of supply over demand to second-lowest in eleven months.

·        Disparity leaves Asia’s refiners with lower stocks ahead of plant maintenance in Q2 2023.

·        Asia refiners’ lower stocks give them more leverage to target firm-to-higher prices.

·        Surge in Singapore’s March base oils exports to three-year high highlights island-state’s large production capacity that went unused in recent years.

·        Singapore's rising March supply simultaneously covers firm demand in southeast Asia and China.

·        Indonesia’s rising imports from Singapore and falling shipments from South Korea point to rising competition between the two key suppliers for the key southeast Asian market.

·        China’s rising base oils exports to Singapore point to ongoing surplus of domestic supplies even as demand recovers.

·        China’s base oils exports show signs of moving to growing number of markets, including more distant outlets.

·        Rise in Chinese exports likely to increase as domestic refiners raise output closer to more typical levels.