Asia base oils supply outlook: Week of 2 Dec

·        Asia’s base oils prices hold firm vs Singapore gasoil prices, especially for heavy grades.

·        Firm margins incentivize refiners to raise or maintain higher base oils output at a time when demand faces seasonal slowdown, raising prospect of pick-up in surplus supply.

·        Sustained strength of base oils margins points to still-tight supply-demand fundamentals even with incentive for refiners to raise output.

·        Arbitrage to move cargoes from Asia to more distant markets stays hard to work, keeping more supplies within the region.

·        Arbitrage to move cargoes to Asia from more distant markets gets more feasible.

·        Discount of US Group II export prices to CFR India prices holds at levels that show signs of slowing for now any such arbitrage shipments.

·        Any such shipments would be unlikely to reach India until well into Q1 2025.

·        Lack of any such shipments for now would curb speed of any supply-build in Asia-Pacific region.

·        Taiwan’s base oils exports gather pace in H2 Nov 2024, with total shipments last month likely to exceed Oct 2024 volumes.

·        More than half the volume moves to southeast Asia and India, with China-bound volume staying low.

·        Singapore’s base oils exports rebound in past week, stay in narrow, lower range over past four weeks.

·        Lower volume points to dip in Singapore’s total exports in Nov 2024 from previous month.

·        Singapore’s base oils re-exports rise in past week to highest in more than a year.

·        Re-exports in past four weeks account for largest share of total exports in more than a year.

·        Re-exports’ rising share of total exports follows jump in Singapore imports from Netherlands since mid-Oct 2024.

·        Singapore’s base oils imports from China slump in past four weeks.

·        Fall in shipments contrasts with rising flows from China over past year.

·        Fall in shipments follows closure of Group I plant in China in Oct 2024.

·        Fall in shipments could point to even tighter availability of Group I supplies in southeast Asia.

·        Japan’s base oils output recovers to three-month high in Oct 2024, pointing to completion of recent plant maintenance.

·        Output still falls from year-earlier levels, stays much lower than in recent years.

·        Lower output sustains Japan’s growing reliance on imports, limits size of any recovery in exports.

·        India’s base oils output stays unusually low in Oct 2024 for third time in four months.

·        Lower output points to additional plant maintenance or production issues.

·        Lower output precedes expected sharp rise in production in coming year when new capacity comes online.

·        Expected rise in output in coming months likely to coincide with pick-up in availability of surplus base oils shipments from overseas markets.

·        India likely to be key target market for large portion of those surplus volumes.

·        Asia base oils imports from Qatar rise to eleven-month high in Oct 2024.

·        Rise in Asia’s imports in Sept-Oct 2024 follows sharp slowdown in total shipments from Qatar to key global outlets in July-Aug 2024.

·        Rise in Asia’s imports points to extension of recovery in total shipments from Qatar at start of Q4 2024.

·        Rise in shipments from Qatar would add to plentiful availability globally of premium-grade base oils.

·        Saudi Arabia’s base oils shipments from ports of Yanbu and Jeddah fall to three-month low in Oct 2024.

·        Signs of rebound in shipments from the two ports in Nov 2024 would add to pick-up in supply from Asia during final two months of 2024.

·        Less feasible arbitrage to outlets like Americas could leave more supplies from Saudi Arabia targeting markets like Middle East and India.