Asia base oils supply outlook: Week of 7 April

·         Asia’s base oils prices resume rise versus feedstock/gasoil prices.

·         Rising margins point to still-firm supply-demand fundamentals at start of Q2 2025.

·         That dynamic could change in coming weeks if economic growth slows, compounding typical seasonal dip in demand from end of second quarter.

·         Any such slowdown in demand would coincide with base oils margins that got boost from lower crude oil prices rather than stronger fundamentals.

·         Firm base oils margins incentivize refiners to maintain or raise output.

·         Dynamic could magnify any subsequent imbalance between supply and demand.

·         Asia’s base oils supply could face limited direct disruption from new US tariffs, with base oils among the products exempted from the tariffs.

·         Exemption of base oils imports from US tariffs reduces pressure on Asia’s base oils suppliers to adjust pricing or trade flows accordingly.

·         Asia’s base oils shipments to US could instead face indirect impact of tariffs because of expected slowdown in global economic activity.

·         Taiwan’s base oils shipment volumes recover in early April 2025 after sharp slowdown in March 2025.

·         Light-grade and heavy-grade supplies  account for similar share of shipments since mid-March 2025.

·         Singapore’s base oils exports over last four weeks fall back to more typical levels, following surge in shipments during previous two months.

·         Slowdown in shipments from Singapore over last four weeks and from Taiwan in March 2025 coincide with widespread round of plant maintenance in Asia.

·         A reversion of shipments from Singapore and Taiwan to more typical levels at start of Q2 2025 could cushion impact of any slowdown in regional demand.

·         Ongoing flow of shipments from US and Europe to southeast Asia partially balances out tighter supply from other refiners in Asia-Pacific region.

·         Any slowdown in Asia’s demand could curb requirements for those supplies.

·         Singapore takes delivery of another large cargo from US in past week.

·         Shipment boosts Singapore’s imports from US to highest four-week volume in more than three years.

·         Shipments extend surge in cargoes from US to Singapore since mid-2024.

·         Japan’s base oils output falls in Feb 2025 to second-lowest level in more than three years.

·         Base oils output likely to stay at lower levels because of scheduled plant maintenance throughout the year.

·         Lower output compounds Asia’s tight availability of Group I base oils.

·         Japan’s lower demand in Feb 2025 cushions impact of lower output.

·         Any pick-up in demand would magnify impact of lower output.

·         Any slowdown in Asia’s economic activity could instead cushion impact of tighter supply.

·        Base oils exports to southeast Asia from Japan, Thailand, Indonesia, and China fall to six-month low in Feb 2025.

·         Fall in exports from key sources of Group I base oils complicates southeast Asia blenders’ stock-building plans ahead of seasonal rise in demand in month of March.

·         Dynamic likely leaves blenders with squeezed stocks at start of Q2 2025.

·         Dynamic highlights importance of additional Group I shipments from Europe and Middle East to supplement’ Asia’s supply.

·         Additional scheduled Group I plant maintenance in Asia over coming months adds to importance of additional shipments to supplement Asia’s supply.

·         Exports from key sources of Group I base oils in Feb 2025 stay higher than year-earlier levels.

·         Those exports, combined with Singapore’s Group I imports, leave supply even higher still.

·         Asia’s Group I heavy-grade prices stay unusually high vs Singapore gasoil prices so far in 2025.

·         Firm margins suggest supply-demand fundamentals stay tight even with higher supply.

·         Dynamic suggests any change in strength of demand could have larger-than usual impact.

·         Thailand’s base oils output recovers in Feb 2025.

·         Thailand’s base oils supply still lags demand in Feb 2025 for second month.

·         Supply shortfall likely cuts Thailand’s base oils stocks ahead of seasonal pick-up in demand in March 2025, followed by plant maintenance work in Q2 and Q3 2025.

·         Any extension of firm domestic demand in recent months, combined with plant maintenance, would likely keep stocks lower over coming months and curb surplus volumes for overseas markets.

·         Any slowdown in domestic lube demand could by contrast curb any supply tightness.

·         Recent market volatility increases feasibility of that scenario.