Asia base oils supply outlook: Week of 29 July

·        Asia’s base oils price premium to gasoil holds steady-to-firm, especially for heavy grades.

·        Firm price premium to gasoil, and weaker gasoil premium to crude oil, incentivizes refiners to maintain or raise base oils output.

·        Arbitrage stays hard to work to India and Middle East, more feasible to China and to Americas.

·        Any arbitrage flows from US to Asia-Pacific region are unlikely before Q4 2024 at the earliest.

·        South Korea’s base oils exports show signs of recovering in July 2024 following slump in June 2024, with pick-up in shipments to India.

·        Taiwan’s base oils shipments rebound in July 2024 after slowdown the previous month.

·        Shipments from Taiwan show signs of rising in July 2024 to highest in six months, with less than 30% of the volume moving to China.

·        Rise in total exports from Taiwan magnifies rise in supplies bound for other markets like southeast Asia and India.

·        Last week's typhoon highlights Asia also faces risk of weather-related supply disruptions over coming months.

·        Singapore’s base oils exports show signs of rising sharply in July 2024 from previous month.

·        Rebound in shipments follows fall in Singapore’s June base oils exports to twenty-month low on steep dip in supplies to India and China.

·        Drop in shipments to India and China follows narrowing of the spread between FOB Asia and CFR prices in those markets in April and May, pointing to weaker demand.

·        Drop in shipments likely helped to slow any supply-build in those markets at end-Q2 2024.

·        China’s base oils exports dip to nine-month low in June 2024, adding to fall in region’s supplies last month.

·        China's exports show signs of staying low in July 2024, with Singapore’s imports from China staying lower than usual for a second month.

·        Combined fall in exports from Asia’s key suppliers in June 2024 cuts their total shipments to second-lowest since H1 2020.

·        Drop in shipments cushions impact of slower demand, leaves supply-demand fundamentals better balanced at start of Q3 2024.

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

·        Increasingly regular flow of large shipments from US to Singapore adds to region’s supply.

·        Firm shipment volumes from Saudi Arabia in June 2024 also cushion impact of drop in supplies from key Asia-Pacific suppliers.

·        China’s June base oils imports rise, lifting country's total supply to three-month high.

·        Rise in supply raises prospect of build-up of surplus volumes in China at start of Q3 2024.

·        Pick-up in shipments to China from key sources like Singapore in July 2024 would add to those supplies.

·        Rise in China’s base oils supply points either to pick-up in demand or pick-up in stocks.

·        Any pick-up in stocks would trigger subsequent moves to work down existing supplies.

·        China's firm domestic Group II prices relative to gasoil and relative to FOB NE Asia prices points to improvement in demand, which would limit stock-build.

·        Key outlets in Asia see surge in delivery of shipments from Qatar in June 2024 to highest in more than five years.

·        Rise in imports could reflect pick-up in flows from Qatar after slowdown in first five months of 2024.

·        Rise in imports could reflect shipment of larger portion of supplies to Asia, where Group III prices held firmer relative to US and Europe in Q2 2024.