Asia base oils - week of Oct 30: Supply outlook

·        Asia’s base oils supply likely to remain at levels that avoid any significant supply-build of premium grades amid plant-maintenance work, steady flows from Singapore.

·        Supply could get boost from pick-up in cargo flows from US as sellers in that market eye alternative outlets in response to likely slowdown in shipments to Mexico.

·        Asia’s Group I base oils supply set to tighten following permanent closure of Group I unit in Japan.

·        Fall in regional Group I supply could trigger pick-up in shipments from Europe to cover shortfall.

·        Singapore’s base oils imports from China rebound through October after sharp slowdown in September.

·        Pick-up in shipments points to rise in surplus supplies in China.

·        Rise in surplus supplies in China points to domestic demand that remains insufficient to consume the supplies.

·        Rise in supplies points to demand that is too low to raise domestic prices to keep the supplies in China.

·        Singapore takes delivery last week of first cargo from Italy in more than two years.

·        Singapore’s imports from Europe previously typically rose during and to cover for plant maintenance work in the island-state.

·        Shipment from Italy follows recent closure of Group I plant in Japan.

·        Plant closure could trigger more regular flow of Group I shipments from Europe to cover for some of the loss of supplies.

·        Singapore’s September base oils imports from US rise to two-year high.

·        Supplies from US rise for second month, suggesting a structural change that has caused the pick-up in shipments.

·        Trend extends into October.

·        Global Group III base oils imports from UAE rise in August to seven-month high.

·        Supplies to Asia rise even amid sharp slowdown in shipments to China.

·        Trend instead reflects rise in shipments to India.

·        India’s growing Group III base oils demand provides attractive alternative outlet to balance out slowdown in Chinese demand.

·        Prospect of rise in India’s Group III base oils production capacity over coming months could magnify impact of China’s more muted demand unless US/Europe demand rises strongly.

·        India faces prospect of pick-up in cargo volumes from Asia reaching the country in October after exports from key suppliers rise to five-month high in September.

·        India’s supplies likely get further boost in October from arrival of shipment of very-light grades from Spain and more shipments from Saudi Arabia.

·        India could start to receive more offers of supplies of US origin, after arbitrage from that market closed in recent months.

·        Rise in Asia’s shipments to India in Sept 2023 contrasts with slowdown in flows to China.

·        Surplus of Asia supplies to India over supplies to China rises to highest in fourteen months.

·        Trend extends pattern of growing share of Asia supplies moving to India, and shrinking share to China.