Asia base oils supply outlook: Week of 2 Sept

·        Asia’s base oils price premium to feedstock/competing fuel prices stays high, incentivizing refiners to maintain high output levels.

·        Incentive to maintain high output coincides with signs of lower supply because of stock-building and recent/ongoing/upcoming plant maintenance throughout the region.

·        Open arbitrage to overseas outlets like Americas could trim further Asia’s base oils supply.

·        Supply could face further squeeze if Group I plant in China undergoes prolonged shutdown or closure.

·        China’s imports from Thailand, Indonesia and Japan average more than 10,000 tonnes/month in first seven months of 2024.

·        Shipments point to ongoing requirements for Group I base oils, even if demand is weaker than before.

·        A shutdown or closure of Group I plant in China would likely trigger rise in requirements from overseas markets.

·        Singapore’s base oils exports fall sharply in four weeks to end-Aug 2024 vs July 2024, drop below average monthly volumes in 2024.

·        Singapore takes delivery over past week of large cargo from Russia.

·        Shipment adds to region’s Group I supplies.

·        South Korea’s base oils exports show signs of staying lower than usual in Aug 2024.

·        South Korea’s base oils output rises to two-year high in July 2024.

·        Rising output contrasts with lower exports in June-July 2024.

·        Rising output, lower exports and firm prices point to balanced-to-tight supply-demand fundamentals.

·        Dynamic points to stock-building ahead of and to cover for planned shutdown of Group II unit in South Korea from mid-Sept 2024.

·        South Korea’s exports to US rise to seven-month high in July 2024; its shipments to the US mostly consist of Group III base oils.

·        India’s Group II imports from South Korea fall in July 2024, while Group III imports hold steady.

·        Those recent trade flows suggest South Korea’s stock-building consists more of Group II base oils.

·        Japan’s base oils output edges up in July 2024 from June 2024, falls for sixteenth month from year-earlier levels.

·        Output likely to extend fall over following months amid ongoing, extended shutdown of one of the country's key base oils units.

·        Taiwan’s base oils exports stay higher than usual in Aug 2024, following surge in shipments in July 2024.

·        Taiwan’s shipments in Aug 2024 include rebound in exports to China.

·        India’s base oils output likely recovers in Aug 2024 after falling to three-year low in July 2024.

·        Output falls because of plant shutdown that involved adding new production capacity to the refinery.

·        Move is first of wave of new capacity additions for India’s refineries over the coming year.