Asia base oils – week of July 3: Supply outlook

·        China’s Shandong diesel premium to crude oil extends slide to lowest in almost a year.

·        China’s diesel demand faces seasonal slowdown.

·        Low diesel demand and low diesel premium to crude incentivize Chinese refiners to cut run-rates or boost output of other products like base oils.

·        India’s retail diesel prices maintain steep premium to discounted feedstock prices, incentivizing continuation of high refinery run-rates.

·        Asia base oils supply in Q2 2023 more than sufficient to cover regional demand even with round of plant maintenance throughout region.

·        Regional plant maintenance work set to be much lighter in Q3 2023.

·        China’s base oils supply likely to continue to rise through Q3 2023, following gradual pick-up in output in Q2 2023.

·        Japan’s base oils output holds relatively firm in May even with plant maintenance work.

·        Steady output adds to signs of sufficient supply in Asia-Pacific throughout Q2 2023, coincides with firm base oils margins.

·        Thai Oil’s base oils unit sees May base oils exports rise to highest in more than a year in response to higher output and lower domestic demand.

·        Trend adds additional supplies to regional market, where Chinese demand remains weaker than usual, forcing shipments to find alternative outlets.

·        Trend likely to extend into Q3 2023 unless base oils output falls.

·        Thailand’s base oils output extends gradual fall in May even amid firm base oils margins.

·        Strength of base oils margins partly reflects avoidance of large supply-build through lower production.

·        Refiners would need to maintain same strategy over coming months, even as firm margins incentivize higher production. 

·        India’s May base oils output stays higher than usual as refiners maintain high run-rates to tap benefit of strong fuel margins and unusually low feedstock costs.

·        Trend set to continue, with base oils output set to rise further when new production capacity comes on-line.

·        India’s firm base oils output and import volumes exceed country’s lube consumption, leaving blenders well supplied and facing little urgency to procure extra volumes.

·        Pick-up in Singapore’s base oils exports to India in June contrasts with lower volumes to China, coincides with ongoing wave of shipments from US to India.

·        Ongoing wave of overseas shipments to India add to country’s plentiful supply.

·        India takes delivery of unusually large shipment from Thailand in June, adding to supply and to signs of weak Chinese demand.