Asia base oils supply outlook: Week of 9 Sept

·        Asia’s base oils prices extend rise vs feedstock/competing fuel prices, adding to incentive for refiners to maximise output.

·        Sustained strength of base oils margins suggests fundamentals remain balanced to tight even with any pick-up in supply.

·        More recent rise in base oils margins likely reflects more the weakness of crude oil prices than any further tightening of base oils fundamentals.

·        Any subsequent impact on demand in response to high margins could ease any supply tightness.  

·        Asia’s base oils supply faces prospect of dipping in coming weeks as plant shutdowns in the region cut output.

·        Open arbitrage to Latin America could divert more shipments to that region.

·        Arbitrage from US to Asia stays shut, curbing volume of supplementary supplies from that market.

·        US prices would need significant price-adjustment for arbitrage to Asia to open.

·        Signs of pick-up in flows from US to India could point to some such price adjustments.

·        Taiwan’s base oils shipments see slowdown in early Sept 2024 after jump in shipments in H2 Aug 2024.

·        South Korea’s base oils exports likely to fall in Sept 2024 because of scheduled plant maintenance work.

·        South Korea’s base oils exports already show signs of staying lower in Aug 2024.

·        Ongoing plant shutdown in Japan likely to curb country’s export volumes.

·        Japan’s base oils imports could get a boost as buyers cover for unexpected and prolonged shutdown of base oils unit.

·        A rise in shipments to Japan could trim availability of supplies for other markets.

·        Singapore’s base oils exports stay lower than usual heading into Sept 2024 and over past four weeks.

·        Any extension of the slowdown would coincide with likely drop in South Korea’s exports in Sept 2024, when scheduled plant maintenance work is set to begin.

·        Singapore takes delivery of another large cargo from Saudi Arabia over past week.

·        Cargo adds to sharp pick-up in shipments from Saudi Arabia so far in H2 2024 compared with H1 2024.

·        Shipments likely consist of Group I base oils, helping to supplement regional supply.

·        China’s base oils output edges up in Aug 2024 as Group III production extends rise.

·        Any extension of that trend could start to impact China’s requirements for imports of Group III base oils.

·        China’s base oils imports in Aug 2024 show signs of exceeding July 2024 levels, boosting country’s total supply well above year-earlier levels.

·        Higher supply could point to firmer demand or to build-up of inventories.

·        Thailand’s Group I base oils output rises to two-year high in July 2024.

·        Rise in output could help to cushion impact of unexpected shutdown of base oils plant in Japan during Q3 2024.

·        Any extension of rise in output could help to cushion impact of expected closure of major Group I unit in China in Q4 2024.

·        Prospect of any such extension in output is unclear in view of drop in Thailand’s Group I production in H1 2024, even when base oils margins held unusually firm.

·        Even so, regional plant closures and shutdowns boost importance of Thailand as increasingly key source of Group I supplies in Asia-Pacific region.

·        Thailand’s higher output boosts country’s total supply in July 2024, lifting surplus over demand to highest level in a year.

·        Rising surplus could spur pick-up in availability of Group I supplies from Thailand for export market.

·        Rising surplus could also incentivize Thailand’s refiners to trim base oils output.

·        Asia’s base oils imports from Qatar fall sharply in July 2024 from June 2024 to three-month low.

·        Global imports from Qatar are typically lower than usual when shipments to Asia are lower.

·        India’s base oils supply could get boost from signs of pick-up in shipments to the country from Saudi Arabia and US in Sept 2024.