Asia base oils supply outlook: Week of 7 July

·         Asia’s base oils price-premium to Singapore gasoil price stays at elevated levels for heavy grades, lower-than-usual levels for light grades.

·         Base oils margins incentivize refiners to maintain higher production levels for heavy grades, and to consider adjusting production levels for light grades.

·         Any such moves to maintain or adjust output would coincide with rise in regional production capacity following completion of most plant-maintenance work.

·         Any rise in supply would coincide with seasonal slowdown in demand.

·         Any rise in surplus supply increases importance of outlets for arbitrage shipments.

·         Firm prices for shipments to India and China could support more arbitrage flows to those markets.

·         Arbitrage to move surplus supplies to more distant outlets like Middle East and Americas stays marginal for light grades, difficult for heavy grades.

·         Pace of Group II exports from Taiwan revives since end-June 2025, with heavy grades accounting for larger share of total shipments in recent weeks.

·         Exports could see slowdown as major storm disrupts cargo-loadings in recent days.

·         Singapore’s weekly base oils exports fall in past week to lowest in five months.

·         Slowdown follows unusual surge in exports the previous week.

·         Any extension of slowdown could point to other factors besides timing of shipments.

·         Even with slowdown, Singapore’s base oils exports stay higher than usual over last four weeks.

·         Re-exports of supplies that originated from outside Singapore fall as share of total exports over last four weeks.

·         Drop in share is first in a month and follows rise in re-exports’ share of total exports at end-June 2025 to highest in almost two years.

·         Lower share of exports follows dip in Singapore’s base oils imports in Q2 2025, including almost-complete pause in shipments from US and Europe.

·         An extension of slowdown in imports could trigger further fall in Singapore’s re-exports as share of total shipments.

·         Any such slowdown would require rise in shipments from domestic sources in the island-state to sustain its high total export volumes.

·         Japan’s base oils output falls to three-month low in May 2025, falls 5% in Jan-May 2025.

·         Lower output mirrors trend throughout Asia in H1 2025 amid protracted round of plant-maintenance work.

·         Asia’s base oils output falls more than 3% in Jan-May 2025, extending trend of lower output throughout the region in recent years.

·         Lower output cuts surplus supply, curbs need for FOB Asia cargo prices to hold at levels that facilitate arbitrage shipments.

·         Lower output instead facilitates more arbitrage shipments from US to outlets like India.

·         Trend could change in coming months following completion of plant-maintenance work and as new production capacity starts to come online.

·         Thailand’s base oils output likely to fall in July-Aug 2025 because of scheduled plant maintenance.

·         Impact of plant maintenance could be more muted because of weaker demand and stock-building ahead of plant-shutdown.

·         Thailand’s Group I base oils supply, or output less domestic and overseas demand, rises in May 2025 to third-highest level since 2022.

·         Rise in surplus supply in April-May 2025 leaves Thailand with larger buffer to cover for drop in output in coming weeks.

·         India’s base oils output likely to recover after dipping in Q2 2025 during round of plant-maintenance work.

·         India’s base oils output stays lower than usual in May 2025 for third time in four months, reflecting impact of maintenance work.

·         Rise in base oils imports balances out lower output, leaving supply rangebound.

·         Output likely to rise in Q3 2025 following completion of plant-maintenance work.

·         Output likely to get further boost in Q4 2025 following expected start-up of new production capacity.

·         Higher output could curb requirements for supplies from overseas markets.

·         Asia’s Group III base oils supply likely holds at healthy levels in Q2 2025 despite increasingly weak regional prices.

·         Asia’s Group III base oils imports from Middle East hold firm in May 2025, lifting shipments in three months to May 2025 to sixteen-month high.

·         Rising supply likely boosts stocks, cushions impact of Group III plant-maintenance work in Middle East during Q2 2025.

·         Asia Group III base oils prices weaken relative to other key regions in Q2 2025.

·         Price-weakness suggests Asia’s supply is more than sufficient to meet demand during that period.

·         Ongoing price-weakness at start of July 2025 suggests weak fundamentals extend into start of Q3.