Asia base oils supply outlook: Week of 5 May

·         Asia’s base oils prices extend rise vs feedstock/gasoil prices.

·         Sustained strength of base oils margins points to limited surplus supply even as firm prices incentivize refiners to boost output.

·         Limited surplus supply at end-Q1/early-Q2 2025 follows seasonal rise in demand and heavy round of plant maintenance.

·         Limited surplus supply in mid-Q2 2025 likely reflects impact of ongoing plant maintenance and stock-replenishment following completion of some maintenance work.

·         Supply-tightness likely to ease at end-Q2 2025 as more plant maintenance draws to close, and with prospect of larger-than-expected slowdown in regional demand.

·         Group I base oils supply could stay tighter for longer amid ongoing/upcoming plant maintenance in Middle East and southeast Asia.

·         Arbitrage to move supplies from Asia to markets like Latin America improves for light grades, stays hard to work for heavy grades.

·         A pick-up in surplus supplies, combined with weaker regional demand, could require more feasible arbitrage opportunities to limit any supply-build.

·         Taiwan’s base oils exports show signs of holding firm in April 2025 even after sharp slowdown in shipments in H2 April 2025.

·         Exports show signs of rebounding in early-May 2025.

·         Singapore’s base oils exports from domestic sources fall in four weeks to end-April 2025 from month-earlier levels to lowest monthly level since end-2022.

·         Drop in exports contrasts with surge in shipments in Feb-March 2025 that help cushion impact of lower volumes from South Korea.

·         More recent drop in shipments to lower-than-usual levels magnifies impact of lower supplies from South Korea.

·         Singapore takes delivery of cargo from Netherlands in past week.

·         Shipment is first from Europe in more than a month.

·         Even with latest cargo, slowdown in imports from Europe in April 2025 contrasts with wave of shipments from Europe in four months to March 2025.

·         Rise in shipments from Europe in early-2025 helps to cushion against impact of lower supplies from South Korea.

·         Drop in shipments curbs that support.

·         South Korea’s base oils output falls to twenty-one month low in March 2025.

·         Output falls mostly because of scheduled plant maintenance work that ends in H2 April 2025.

·         Lower output triggers supply shortfall in March 2025 for fifth time in six months, by largest volume in more than five years.

·         South Korean refiners likely to need longer to replenish depleted stocks in response to large and sustained supply shortfall.

·         Expected rise in surplus supply in Q2 2025 could take longer to appear as refiners first replenish depleted stocks.

·         Avoidance of supply surplus for longer could curb pressure on refiners to adjust prices.

·         Higher margins for longer, and weaker demand, could also speed up round of stock replenishment.

·         Japan’s base oils output recovers to five-month high in March 2025.

·         Higher output and lower demand free up more supplies for export.

·         Japan's base oils exports rebound in March 2025 to nineteen-month high.

·         Rebound in exports, partly because of lower domestic demand, reflects another indirect repercussion of US tariffs.

·         A more widespread repeat of this scenario, of lower demand freeing up more supplies for export, could trigger unexpected pick-up in supplies in Asia market.

·         Rebound in Japan’s base oils exports in March 2025 has muted benefit for southeast Asia, with most of the shipments moving to South Korea.

·         Asia’s imports of premium-grade base oils from Middle East stay unusually high in March 2025 for second time in last three months. 

·         Pick-up in shipments lifts total imports from Middle East in last three months to second-highest level since early-2024.

·         Pick-up in shipments to Asia coincides with peak-demand period in that region.

·         Pick-up in shipments to Asia coincides with and cushions impact of heavy round of plant maintenance in the region in Q1 2025.

·         Pick-up in shipments likely helps to ease any impact of maintenance work on light-grade supply especially.

·         Pick-up in shipments to Asia likely to be temporary.

·         Pick-up in shipments coincides with rise in China’s Group III base oils output, precedes likely slowdown in Asia’s lube demand in coming months.