· Asia’s base oils supply could move from relative balance to surplus amid signs of pick-up in flows from several markets.· Persistently high base oils margins incentivize refiners to maintain or raise output, even at a time when demand shows signs of slowing.· Any further pick-up in shipments from less regular sources like Indonesia and Russia could cushion slowdown in Group I supplies from Japan.· More limited arbitrage opportunities for Group II light grades could trigger faster build-up of those supplies..· Typical build-up of surplus supplies in second quarter of the year shows signs of being smaller than usual so far this year amid drop in supplies from South Korea, Taiwan and Japan.· Base oils exports from South Korea, Taiwan, Japan, China and Singapore combined fall in April 2024 for third month from year-earlier levels..· Slump in exports in first four months of 2024 trim size of supply-surplus so far this year.· Continuation of smaller surplus would curb pressure on refiners to make sharp price adjustments to clear supply overhang.· Continuation of smaller surplus would likely require adjustment to current supply dynamics..· South Korea’s April base oils output falls from March 2024 at a slower pace than drop in country’s base oils exports in April from March 2024..· South Korea’s steeper fall in exports in April 2024 cushion impact of plant maintenance work, curb size of shortfall of supply vs demand.· Smaller mismatch between supply and demand raises prospect of more rapid recovery in South Korea’s base oils exports through rest of Q2 2024.· South Korea’s base oils output and exports fell in Q2 2023 because of plant maintenance work.· Lack of scheduled maintenance work through rest of Q2 2024 raises prospect of rise in output and exports vs year-earlier levels..· South Korea’s base oils exports likely recovered strongly in May 2024 from previous month.· Taiwan’s base oils exports likely stayed lower than usual in May 2024. · Taiwan’s May base oils exports would have been even lower but for shipment of large cargo that was delayed from April 2024.· Taiwan’s base oils exports face growing incentive to target other markets instead of China following imposition of tariffs on shipments to China.· Alternative option would be to cut FOB NE Asia cargo prices for shipments to China to stay competitive.· Rise in China’s domestic base oils production capacity in recent years likely to limit repercussions of any further slowdown in shipments from Taiwan..· Singapore’s May base oils exports likely rose to highest monthly volume this year.· Any extension of rise in shipments from key sources like South Korea and Singapore could trigger fast pick-up in surplus supplies in Asia over the coming weeks. · Singapore’s base oils imports last week include unusually large shipment from the US..· Signs of increasingly regular shipments from US add to supply in Asia market..· Japan’s April base oils output falls for thirteenth month year-on-year..· Lower output cuts supply available for export, with overseas shipments falling for eighth month and at faster pace than drop in output.· Trend incentivizes regional blenders that are reliant on overseas supplies of Group I base oils to switch to premium-grade base oils instead..· India’s base oils supply could be more volatile over the coming months, with planned plant shutdown from mid-June 2024 set to cut domestic output.· Lower output could coincide with lower base oils imports as less workable arbitrage cuts attraction for overseas refiners to move surplus supplies to India.· Planned resumption of base oils output from end-July 2024 could then coincide with pick-up in availability of surplus supplies in other markets..Asia base oils demand outlook: Week of 3 June
· Asia’s base oils supply could move from relative balance to surplus amid signs of pick-up in flows from several markets.· Persistently high base oils margins incentivize refiners to maintain or raise output, even at a time when demand shows signs of slowing.· Any further pick-up in shipments from less regular sources like Indonesia and Russia could cushion slowdown in Group I supplies from Japan.· More limited arbitrage opportunities for Group II light grades could trigger faster build-up of those supplies..· Typical build-up of surplus supplies in second quarter of the year shows signs of being smaller than usual so far this year amid drop in supplies from South Korea, Taiwan and Japan.· Base oils exports from South Korea, Taiwan, Japan, China and Singapore combined fall in April 2024 for third month from year-earlier levels..· Slump in exports in first four months of 2024 trim size of supply-surplus so far this year.· Continuation of smaller surplus would curb pressure on refiners to make sharp price adjustments to clear supply overhang.· Continuation of smaller surplus would likely require adjustment to current supply dynamics..· South Korea’s April base oils output falls from March 2024 at a slower pace than drop in country’s base oils exports in April from March 2024..· South Korea’s steeper fall in exports in April 2024 cushion impact of plant maintenance work, curb size of shortfall of supply vs demand.· Smaller mismatch between supply and demand raises prospect of more rapid recovery in South Korea’s base oils exports through rest of Q2 2024.· South Korea’s base oils output and exports fell in Q2 2023 because of plant maintenance work.· Lack of scheduled maintenance work through rest of Q2 2024 raises prospect of rise in output and exports vs year-earlier levels..· South Korea’s base oils exports likely recovered strongly in May 2024 from previous month.· Taiwan’s base oils exports likely stayed lower than usual in May 2024. · Taiwan’s May base oils exports would have been even lower but for shipment of large cargo that was delayed from April 2024.· Taiwan’s base oils exports face growing incentive to target other markets instead of China following imposition of tariffs on shipments to China.· Alternative option would be to cut FOB NE Asia cargo prices for shipments to China to stay competitive.· Rise in China’s domestic base oils production capacity in recent years likely to limit repercussions of any further slowdown in shipments from Taiwan..· Singapore’s May base oils exports likely rose to highest monthly volume this year.· Any extension of rise in shipments from key sources like South Korea and Singapore could trigger fast pick-up in surplus supplies in Asia over the coming weeks. · Singapore’s base oils imports last week include unusually large shipment from the US..· Signs of increasingly regular shipments from US add to supply in Asia market..· Japan’s April base oils output falls for thirteenth month year-on-year..· Lower output cuts supply available for export, with overseas shipments falling for eighth month and at faster pace than drop in output.· Trend incentivizes regional blenders that are reliant on overseas supplies of Group I base oils to switch to premium-grade base oils instead..· India’s base oils supply could be more volatile over the coming months, with planned plant shutdown from mid-June 2024 set to cut domestic output.· Lower output could coincide with lower base oils imports as less workable arbitrage cuts attraction for overseas refiners to move surplus supplies to India.· Planned resumption of base oils output from end-July 2024 could then coincide with pick-up in availability of surplus supplies in other markets..Asia base oils demand outlook: Week of 3 June
