Asia base oils - week of Jan 29: Supply outlook

·        Asia’s Group I base oils supply set to remain tighter than usual at least until March 2024.

·        Plant maintenance work in southeast Asia in early 2024 coincides with signs of ongoing slowdown in supplies from China to Singapore and slump in shipments from Japan to southeast Asia.

·        Slowdown raises prospect of buyers seeking Group I supplies from other regions to cover requirements.

·        Group I bright stock prices in China and India rise more strongly than rising fob Asia bright stock prices in Jan 2024.

·        Strength of bright stock prices in destination markets like China and India points to tighter availability throughout the region.

·        Asia’s Group II base oils supply likely to be tighter than expected amid combination of run-cuts and unexpected plant shutdown.

·        Asia’s falling Group II price premium to regional gasoil prices adds to incentive for refiners to cut output.

·        Any delay in the restart of Taiwan's Group II base oils unit would coincide with a likely pick-up in Chinese demand from end-Feb 2024, after the lunar new year holidays.

·        Singapore’s December base oils imports fall to twenty-three month low.

·        Shipments fall because of pause in supplies from China and Japan.

·        Singapore’s base oils imports stay unusually low in Jan 2024 amid ongoing slide in shipments from China.

·        Prospect of sporadic flows from China and ongoing halt in shipments from Japan leaves Singapore short of Group I base oils.

·        Trend leaves Singapore more reliant on Group I supplies from more distant markets like Mideast Gulf and Europe.

·        Trend raises prospect of more volatile Group I supply dynamics in southeast Asia over coming months.

·        Share of Singapore’s exports moving to southeast Asia falls in Jan 2024 as more shipments head to China.

·        Trend could point to weaker demand in southeast Asia.

·        Steadier demand in southeast Asia would conversely point to increasingly tight supply in the region amid growing competition from China.  

·        China’s December base oils exports to Europe rise to record-high even as total exports stay lower than usual for a second month.

·        Volume of supplies bound for Europe remains relatively low. But steady flows from Q1 2023 contrast with dearth of any such shipments before then.

·        Rise in shipments coincides with open arbitrage to move Group II and Group III base oils from Asia to Europe.

·        Still-open arbitrage and China’s plentiful supply raise prospect of continuation or rise in those trade flows in 2024.

·        India takes delivery of large volume of supplies from Taiwan and Saudi Arabia so far in Jan 2024, reflecting arrival of wave of supplies that loaded in Dec 2023.

·        India’s base oils supply from Saudi Arabia likely to fall in coming weeks following slowdown in base oils exports from Yanbu and Jeddah in Jan 2024.

·        India’s supplies of very-light grade supplies could face additional pressure as sliding price premium to gasoil incentivizes Asia’s refiners to trim availability.