Asia base oils supply outlook: Week of 29 September

·         Asia’s base oils prices slip versus gasoil prices amid recent rise in crude oil prices.

·         Heavy-grade base oils margins stay relatively firm even with recent downward pressure.

·         Recent squeeze on margins could prompt refiners to resist price-adjustments to reflect any change in supply-demand fundamentals.

·         Firm diesel price-premium to crude oil magnifies impact of  squeeze on base oil margins, adding to refiners’ resistance to price-adjustments, especially for light grades.

·         Still-firm heavy-grade margins suggest supply-demand fundamentals stay relatively tight despite completion of most plant-maintenance work.

·         Firm margins incentivize refiners to maintain higher output levels.

·         Closed arbitrage to Americas and narrower gap between FOB Asia and domestic China prices add to signs of still-tight regional supply.

·         Any ongoing supply-tightness could start to ease following recent start-up of new Group II unit in Singapore.

·         Dip in Singapore’s base oils exports from domestic sources in July-Aug 2025 could reflect impact of initial start-up of new unit.

·         Rise in Singapore’s base oils exports from domestic sources in recent weeks coincides with start-up of new unit.

·         Prospect of further rise in Singapore’s base oils supply coincides with still-firm margins.

·         Dynamic could point to dip in supply from other sources.

·         Supply from key regional producers instead shows signs of rising rather than falling.

·         Rise in supply from growing number of sources raises prospect of increase in surplus volumes and rise in competition for key outlets in Asia-Pacific region.

·         Less feasible arbitrage to overseas markets could slow down removal of any surplus volumes, adding to regional surplus.  

·         South Korea’s base oils output rises to three-year high in Aug 2025.

·         Rise in output outpaces domestic/overseas demand, triggering rise in surplus supplies.

·         Pick-up in surplus supplies likely delays rather than avoids impact of rise in output on wider Asia-Pacific market.

·         Pick-up in surplus supplies raises prospect of subsequent rise in exports to avoid large stock-build.

·         Taiwan’s base oils export volumes stay high in Sept 2025 even with some weather-related cargo-loading delays.

·         High shipment volumes throughout 2025 contrasted with and partially cushioned impact of more volatile flows from other key suppliers so far this year.

·         High volumes now add to rise in shipments from other suppliers.

·         China’s Group II base oils supply extends rise in Aug 2025, contrasting with shrinking supply of Group I and Group III base oils.

·         Rising Group II supply boosts its share of China’s total paraffinic supply to highest level in more than three years.

·         China’s still-growing Group II base oils market could boost incentive for overseas refiners to increase shipments of those supplies to the country.

·         China’s large Group II production capacity could deter such moves.

·         China’s shrinking Group III base oils market could curb incentive for overseas refiners to boost shipments of those supplies to the country.

·         Slump in China’s Group III base oils production this year, and imports’ still-large share of total Group III supply, could instead boost feasibility of such moves.

·         India’s supply of Group II light-grade base oils could improve as firmer margins in Asia during most of Q3 2025 incentivize refiners to boost output of the product.

·         Availability could get further boost from signs of improved domestic supply, combined with rising production in southeast Asia.

·         Any pick-up in supply would follow tighter availability in Aug 2025 after slump in India's imports of Group II light grades that month.

·         Imports fall mostly because of drop in shipments from South Korea.

·         Rise in shipments from other sources like US in Aug 2025 include more Group II mid-viscosity and heavy-grade base oils, but no light grades.

·         Saudi Arabia’s base oils exports likely to fall in Q4 2025 because of major plant-maintenance work.

·         Fall in shipments would follow rebound in exports in Aug 2025 and signs of steady flows in Sept 2025.

·         Prospect of rise in supply in Asia in coming months, and persistent flow of surplus volumes from US, could cushion impact of likely drop in shipments from Saudi Arabia.

·         Market then faces prospect of further rise in supply in early 2026 following completion of plant-maintenance in Saudi Arabia.