Asia base oils - week of Nov 6: Supply outlook

·        Asia’s base oils supply likely to stay balanced amid rise in output in China, rising exports from South Korea.

·        Rise in supplies balances out ongoing pause in exports from Taiwan because of Group II plant maintenance work.

·        Asia Group II price discount to Europe stays much narrower than in Q4 2023, pointing to less pressure to move supplies to more distant markets.

·        Asia’s Group I supplies face adjustment following closure of base oils plant in Japan in Oct 2023.

·        Plant closure shows signs of triggering pick-up in Group I base oils shipments from Europe to Asia.

·        China’s base oils supply could continue to trend higher amid firmer margins, weaker diesel values, recent start-up of new capacity.

·        China’s base oils output rises to nineteen-month high in October following recent start-up of new Group III base oils unit.

·        China’s higher Group III base oils supply likely to cover more of country’s domestic requirements.

·        Trend could curb demand for Group III base oils from overseas sources.

·        China’s rising Group I base oils output could similarly impact demand for overseas supplies.

·        Thailand’s September base oils exports rise to two-year high.

·        Wave of shipments helps to cut Thailand’s supply surplus.

·        Wave of arbitrage shipments from Thailand to UAE and India contrast with smaller volumes to China.

·        Trend reflects changing demand dynamics in Asia and lack of surplus Group I supplies in Europe.

·        Trend could change following closure of Group I base oils unit in Japan in Oct 2023.

·        Plant closure could boost regional demand for supplies from other sources in Asia like Thailand.

·        Japan’s September base oils supply rises to five-month high amid pick-up in output ahead of the plant closure.

·        Japan’s higher-than-usual base oils output throughout this year could reflect moves to build stocks ahead of plant closure.

·        Japan’s net supply still falls in September for first time in six months and by largest volume in a year.

·        Drop in net supply speeds up fall in Japan’s base oils inventories to eighteen-month low.

·        Falling inventories highlight speed of consumption of surplus supplies even with higher output.

·        Impact of plant closure in Oct 2023 likely to be felt more quickly in face of lower inventories.

·        Trade flows already show signs of adjusting in response to plant closure.

·        Singapore’s base oils imports from Italy surge in last four weeks to highest in more than two years.

·        Thailand’s September base oils output falls to seven-month low even as Asia-Pacific region readies for structurally tighter Group I supplies.

·        Thailand’s lower base oils output follows slump in Asia Group I base oil margins in Q3 2023.

·        Prospect of tighter Group I supply in Asia suggests prices will need to be at levels that incentivize rather than deter base oils production.

·        India’s September base oils supply falls to seven-month low amid lower domestic output, steady imports.

·       India’s lower base oils supply contrasts with firm demand.