Asia base oils - week of Dec 4: Supply outlook

·        Asia’s base oils supply set to get boost following recent/imminent completion of plant-maintenance in Japan/Taiwan.

·        Asia’s supply set to get further boost from steady flow of arbitrage shipments from US.

·        Pick-up in shipments of premium-grade base oils from Mideast Gulf to India would add to supplies in that market.

·        Expected pick-up in regional demand in Q1 2024 would absorb some of the rise in supply.

·        Asia’s surplus supply could have more difficulty going to Americas market amid more competitive US prices.

·        Any signs of rise in surplus volumes in Asia would increase need to close the arbitrage to the region from sources like US.

·        China’s base oils supply shows signs of rising even with delayed restart of some plants.

·        China’s lower Group II price premium vs domestic diesel could incentivize refiners to extend further any plant shutdowns or run-cuts.

·        Asia's Group I supply set to remain tighter following plant closure in Japan, slowdown in shipments from Europe in Nov 2023.

·        South Korea’s October base oils output holds steady for third month.

·        Base oils output stays lower than in Jan-Aug 2022.

·        Steady output at lower levels could point to moves to avoid build-up of surplus supplies.

·        Any extension of such a strategy could put pressure on output to fall following scheduled restart of Taiwan’s Group II unit in 1H Dec 2023.

·        Japan’s October base oils output falls to eight-month low following closure of another Group I base oils plant in the country.

·        Drop in output likely to be permanent unless other base oils plants boost run-rates.

·        Japan’s lower base oils output cuts country’s and region’s Group I supply.

·        Repercussions of drop in supply already extend to Europe, which is moving more Group I supplies to Asia.

·        Trend likely to continue well into next year until or unless blenders replace Group I supplies with alternative base oils grades.  

·        Singapore’s base oils imports from Japan halt in four weeks to end-Nov 2023.

·        Pause in shipments reflects change in trade flows following plant closure in Japan in Oct 2023.

·        Singapore’s base oils imports from Italy also halt in four weeks to end-Nov 2023.

·        Rise in supplies from Italy in Oct 2023 had helped to cushion slowdown in shipments from Japan.

·        Singapore could face tighter Group I supply unless more shipments arrive from Italy or other sources.

·        Thailand’s October base oils exports fall from two-year high in Sept 2023.

·        Lower volumes point to more limited surplus supply and more muted pressure to clear the surplus.

·        Thailand’s base oils exports rise 45pc in first ten months of 2023 yoy.

·        Shipments surge this year even before closure of Group I plant in Japan.

·        Surge in shipments this year could curb Thailand’s room to increase Group I exports even more.

·        Prospect of revival in Thailand’s domestic lube demand could instead cut the flow of exports.

·        Any such move would tighten further the availability of Group I base oils in the Asia-Pacific region.

·        Vietnam’s base oils imports from Singapore and South Korea are level-pegging in first ten-months of 2023.

·        Singapore had previously been Vietnam’s largest supplier.

·        South Korea’s growing share of Vietnam’s base oils market points to more intense competition for the country’s market.

·        Competition contrasts with Singapore’s growing market share of Indonesia’s market, South Korea’s growing share of Philippines’ market.

·        India’s October base oils supply outpaces domestic demand for first time in three months.

·        Surplus supply helps to replenish blenders’ stocks and cover expected seasonal rise in demand during Q4 2023.

·        Surplus supply could widen further in Nov 2023 amid signs of strong pick-up in imports from sources like South Korea and US.

·        Any sustained rise in surplus supply would likely prompt blenders to curb their urgency to lock in more supplies and to target even more competitive prices for any additional volumes.

·        Pakistan’s base oils supply holds steady at lower level in Q3 2023 even as lube demand rises.

·        Supply stays lower even as base oils imports recover.

·        Trend points to firmer demand for overseas supplies, lower demand for domestic Group I supplies.

·        Firmer demand for premium-grade base oils, and any extension of recovery in domestic lube demand, raises prospect of requirements for even more supplies from South Korea.