Asia base oils supply outlook: Week of 24 March

·         Asia’s heavy-grade base oils prices stay high versus feedstock/competing fuel prices.

·         High margins point to tight supply-demand fundamentals, incentivizing refiners to maintain or raise output.

·         Light-grade base oils prices stay low vs feedstock/competing fuel prices, cutting incentive for refiners to raise output.

·         Mixed price incentives coincide with ongoing and additional plant maintenance in Asia and in other regions over coming weeks.

·         Ongoing/additional maintenance work could limit any pick-up in supply in Q2 2025 even after completion of some plant shutdowns.

·         Any extended slowdown in shipments from sources like Taiwan could also keep supply more balanced.

·         Taiwan’s base oils exports show signs of falling in March 2025 from previous month.

·         Slowdown would follow unusually high shipment volumes in Jan-Feb 2025.

·         Asia’s Group II base oils prices hold at levels that keep arbitrage shut to markets like Latin America.

·         Closed arbitrage reflects tight supply, keeps any surplus volumes in Asia-Pacific region.

·         Asia prices hold at levels that facilitate arbitrage flows from markets like US to outlets like Middle East and India.

·         Plant maintenance in US and typical seasonal rise in demand in that market could curb any such flows that have already been lower than expected.

·         Volume of exports from US to outlets like India could face change in coming weeks if any change in import taxes impacts more typical trade flows.

·         Singapore’s base oils exports stay higher than usual last week for third straight week.

·         Exports hold at more than 50,000 tonnes/week for third week for first time in more than three years.

·         High shipment volumes lift total exports over last three weeks to highest since Aug 2023.

·         Singapore takes delivery of large shipment from US in past week.

·         Shipment is largest from US since May 2024.

·         Shipment extends larger-than-usual flow of imports from markets like Europe and US, boosting supply in southeast Asia.

·         South Korea’s base oils exports rebound in Feb 2025.

·         Exports rebound even as plant maintenance in South Korea begins at end-Feb 2025.

·         Rebounding exports points to release of stocks built up ahead of shutdown.

·         Build-up of stocks ahead of shutdown add to tighter-than-usual regional supply at start of 2025.

·         Build-up of stocks coincides with blenders’ moves to replenish inventories ahead of peak-demand season at end-Q1 2025.

·         Dynamic suggests market could have already faced largest impact of the plant maintenance.

·         South Korea’s base oils exports to US and Europe rebound in Feb 2025.

·         US and Europe are key outlets for Group III base oils from South Korea.

·         Rebound in shipments in Feb 2025 suggests Group III base oils were key factor behind previous drop in exports.

·         Any drop in Group III base oils exports would be despite scheduled plant maintenance work in South Korea from end-Feb 2025 impacting Group II base oils more than Group III.

·         Pick-up in South Korea’s shipments adds to rebound in base oils exports from Asia’s key suppliers in Feb 2025 to six-month high.

·         Rise in shipments helps blenders to replenish stocks, cover for seasonal rise in lube demand at end-Q1 2025.

·         Export volume could fall in March 2025 on dip in supplies from Taiwan and likely slowdown in flows from South Korea, outweighing high exports from Singapore.

·         Saudi Arabia’s base oils shipments from Yanbu/Jeddah fall to seven-month low in Feb 2025.

·         Slowdown cuts shipments to India, whose very-light-grade base oils imports from Saudi Arabia fall to five-month low in Feb 2025.

·         India’s imports of very-light grade base oils from Qatar by contrast surge in H1 March 2025 to highest since end-2023.

·         CFR India and domestic China Group II light-grade price-discount to heavy-grade prices narrows from unusually wide levels.

·         Any further improvement in light-grade prices relative to heavy-grade prices could point to change in supply-demand dynamics between the two grades.