· Asia-Pacific base oils supply set to tighten over coming weeks in face of squeezed margins, plant maintenance and plant closure.· China’s Shandong diesel prices hold firm versus crude oil, contrasting with weak base oils value versus diesel.· China’s rising feedstock costs put pressure on domestic refiners to raise prices.· China’s squeezed base oils margins incentivize refiners to cut output or extend plant maintenance work.· There are some signs of such moves.· China’s September base oils output still likely rises strongly versus August even with some extended or additional plant maintenance work.· More plentiful supply and blenders’ preference to manage stocks carefully likely to limit refiners’ leverage to raise prices.· Blenders’ moves to raise their own finished-product prices gives them more room to absorb higher prices.· Blenders also likely to face resistance from end-users to higher finished-lube prices..· China’s Group I base oils imports fall in August to six-year low on weak demand, tighter supply..· Prospect of further drop in supply from Japan likely to leave China even more reliant on Thailand for any Group I base oils requirements..· Slack demand in northeast Asia markets like China boosts pressure on South Korea’s refiners to target other more distant markets..· Trend likely to boost competition for markets in southeast Asia and for India.· South Korea’s exports to India could in turn start to face pressure when new production capacity in that market begins operations in the coming months..· South Korea’s base oils exports to southeast Asia hold firm in August amid ongoing rise in shipments to markets like Vietnam, Singapore and Philippines..· Trend highlights importance of region for refiners throughout Asia and importance of growing demand growth in the region..· Singapore’s August base oils exports exceed 200,000 t/month level for just second time since early 2020..· Rise in shipments coincides with higher exports from South Korea and Taiwan in August.· Higher regionwide shipments give blenders the opportunity to replenish stocks ahead of seasonal pick-up in demand from late Q3 2023.· Any such moves would curb buyers’ urgency to lock in more supplies in the coming weeks, and give them leverage to rely on term shipments to cover requirements. .· India’s August base oils supply falls to eight-month low as domestic output dips to one-year low.· Drop in supplies precedes seasonal rise in lube demand from end-Q3 2023, raising prospect of pick-up in base oils requirements from overseas sources.· Those sources are less likely to include significant volumes from the US amid less workable arbitrage, and from Taiwan amid plant maintenance work in Q4 2023..Global base oils - week of Sep 25: Price outlook - arbitrage
· Asia-Pacific base oils supply set to tighten over coming weeks in face of squeezed margins, plant maintenance and plant closure.· China’s Shandong diesel prices hold firm versus crude oil, contrasting with weak base oils value versus diesel.· China’s rising feedstock costs put pressure on domestic refiners to raise prices.· China’s squeezed base oils margins incentivize refiners to cut output or extend plant maintenance work.· There are some signs of such moves.· China’s September base oils output still likely rises strongly versus August even with some extended or additional plant maintenance work.· More plentiful supply and blenders’ preference to manage stocks carefully likely to limit refiners’ leverage to raise prices.· Blenders’ moves to raise their own finished-product prices gives them more room to absorb higher prices.· Blenders also likely to face resistance from end-users to higher finished-lube prices..· China’s Group I base oils imports fall in August to six-year low on weak demand, tighter supply..· Prospect of further drop in supply from Japan likely to leave China even more reliant on Thailand for any Group I base oils requirements..· Slack demand in northeast Asia markets like China boosts pressure on South Korea’s refiners to target other more distant markets..· Trend likely to boost competition for markets in southeast Asia and for India.· South Korea’s exports to India could in turn start to face pressure when new production capacity in that market begins operations in the coming months..· South Korea’s base oils exports to southeast Asia hold firm in August amid ongoing rise in shipments to markets like Vietnam, Singapore and Philippines..· Trend highlights importance of region for refiners throughout Asia and importance of growing demand growth in the region..· Singapore’s August base oils exports exceed 200,000 t/month level for just second time since early 2020..· Rise in shipments coincides with higher exports from South Korea and Taiwan in August.· Higher regionwide shipments give blenders the opportunity to replenish stocks ahead of seasonal pick-up in demand from late Q3 2023.· Any such moves would curb buyers’ urgency to lock in more supplies in the coming weeks, and give them leverage to rely on term shipments to cover requirements. .· India’s August base oils supply falls to eight-month low as domestic output dips to one-year low.· Drop in supplies precedes seasonal rise in lube demand from end-Q3 2023, raising prospect of pick-up in base oils requirements from overseas sources.· Those sources are less likely to include significant volumes from the US amid less workable arbitrage, and from Taiwan amid plant maintenance work in Q4 2023..Global base oils - week of Sep 25: Price outlook - arbitrage