Asia base oils supply outlook: Week of 27 October

·         Asia’s Group II base oils price-premium to Singapore gasoil falls amid rebound in crude and diesel prices.

·         Ongoing fall in outright heavy-grade prices magnifies size of dip in heavy-grade margins.

·         Heavy-grade margins maintain steep, even if narrowing premium to light-grade margins.

·         Higher margins incentivize refiners to focus on producing more heavy grades, despite persistent surplus of those supplies.

·         Any signs of base oils margins holding at lower levels would point to fundamentals that are insufficiently strong for refiners to raise prices in response to higher feedstock costs.

·         Dynamic could incentivize refiners to adjust output to boost their leverage to raise prices.

·         Dynamic would follow signs of recovery in Asia’s base oils supply in recent months.

·         Signs of slowdown in shipments from Taiwan and Singapore in recent weeks could slow pace of that recovery.

·         Plant-maintenance in Saudi Arabia in Nov-Dec 2025 could also leave fundamentals more balanced.

·         Singapore’s base oils exports extend fall in past week, pushing down total shipments over past four weeks to lowest level in more than a month.

·         Exports fall despite rise in Singapore’s base oils production-capacity following start-up of new unit in Sept 2025.

·         Any extension of slowdown in exports could point to production issues.

·         Even with recent slowdown in exports, Singapore’s base oils trade flows face prospect of major adjustment in coming months following start-up of new base oils unit.

·         Surge in Singapore’s base oils imports in Jan-Sep 2025 provides supply to support rise in island-state’s exports of shipments originating from overseas markets.

·         Singapore’s re-exports account for larger-than-usual share of island-state’s total exports in 2025, facilitating rise in total shipments this year.

·         Start-up of new unit boosts Singapore’s domestic output, curbing need for supplementary volumes from overseas markets.

·         Dynamic could trigger slowdown in Singapore’s base oils imports over coming months.

·         Singapore’s base oils imports likely to fall in Oct 2025 from previous month even with pick-up in shipments in past week.

·         Imports rise in past week following arrival of more shipments from US and Europe.

·         Arrival of additional shipments from US and Europe could point to ongoing requirements for supplementary volumes.

·         Ongoing requirements for supplementary volumes could suggest that new unit has yet to reach full-output levels following recent start-up in Sept 2025.

·         China’s Group III base oils imports account for higher share of country’s total Group III supply in Sept 2025 and Q3 2025.

·         Imports’ rising share of Group III base oils supply suggests that China’s domestic refiners are focusing on producing more Group II base oils instead of Group III base oils.

·         Focus on producing more Group II base oils could reflect that grade’s still-growing requirements and larger share of domestic base oils demand.

·         Focus on producing more Group II base oils could reflect more muted impact on that grade than on Group III base oils from growing electrification of China’s vehicle fleet.

·         Focus on producing more Group II base oils coincides with increasingly narrow Group III price-premium to Group II base oils.

·         Narrow price-gap between Group II and Group III base oils, and yield-loss from producing Group III base oils, adds to incentive to produce more Group II instead.

·         China’s focus on producing more Group II base oils could support firmer demand for overseas supplies of Group I and Group III base oils and cut requirements for Group II base oils.

·         Extension of that dynamic would coincide with rise in Asia’s Group II base oils production capacity following recent and upcoming start-up of more units in the region.

·         Scenario would put pressure on new supplies to target other markets rather than China.

·         Asia's Group I base oils supply gets boost from recent pick-up in availability from China.

·         China’s base oils exports rise to three-year-high in Sept 2025, with unusually large volume heading to Middle East.

·         Shipments to Middle East likely consist of Group I base oils and tap wide gap between FOB Asia and ex-tank UAE base oils prices.

·         Pick-up in Group I flows from Asia to Middle East curbs requirements from other regions like Europe and US.

·         Dynamic could complicate any pick-up in surplus volumes in those other regions.

·         Saudi Arabia’s base oils exports could stay lower over coming months because of scheduled maintenance work starting in Nov 2025.

·         Any slowdown would follow drop in exports in Sept 2025.

·         Rise in Asia’s base oils exports in Sept 2025 cushions impact of slowdown in shipments from Saudi Arabia.

·         Any extension of those same trends in Q4 2025 would cushion impact of plant-maintenance work in Saudi Arabia.

·         Any such extension could also provide Asia suppliers with opportunity to boost market share in more distant outlets at a time when additional new production capacity is set to come online.