Asia base oils supply outlook: Week of 4 August

·         Asia’s Group II heavy-grade base oils price-premium to gasoil holds steady at lower level, close to levels in Q4 2024.

·         Lower heavy-grade base oils margins and falling regional cargo price point to weaker supply-demand fundamentals.

·         Even at lower level, price-premium remains at level that incentivizes refiners to maintain steady output of the product.

·         Asia Group II heavy-grade prices also maintain steep premium to prices in more distant markets like Americas.

·         Relative price-strength of heavy grades and persistence of that price-strength suggest that any regional surplus remains manageable.

·         Asia’s light-grade base oils price-premium to gasoil holds in narrow range, staying lower than in Q2 2025 and in Q3 2024 but higher than in Q3 2023.

·         Lower light-grade price-premium could curb incentive for refiners to raise output.

·         Price-premium holds at level that is unlikely to incentivize refiners to cut output.

·         Higher outright prices and concern about tight supply incentivize refiners to hold back.

·         Same factors incentivize buyers to lock in supplies, adding to any subsequent tightness.

·         Asia’s base oils supply could face smaller-than-usual build-up of surplus volumes in Q3 2025 even with completion of most plant-maintenance work.

·         Supply could be more balanced amid signs that buyers and refiners entered Q3 2025 with tighter-than-usual stocks.

·         Tighter-than-usual stocks could spur steadier consumption, cushioning impact of seasonal slowdown in demand.

·         Open arbitrage to more regular outlets like India and Middle East could point to steady buying interest in those markets.

·         Closed arbitrage to less regular outlets like Americas could point to insufficient supply to require removal of surplus volumes in those markets.

·         South Korea’s base oils supply shows signs of being tighter than usual at start of Q3 2025.

·         Lower output and rising domestic and overseas demand trigger jump in South Korea's supply-shortfall in June 2025 to second-highest level in eight months.

·         Tighter supply likely impacts Group III base oils because of plant-maintenance in June 2025.

·         Tighter supply likely also impacts Group II base oils, which likely account for most of rebound in South Korea's exports in June 2025.

·         Supply could be tighter than expected at start of Q3 2025 if rebound in South Korea’s domestic demand in June 2025 exceeded expectations.

·         Tighter supply could cushion impact of seasonal slowdown in regional demand in Q3 2025.

·         Japan’s base oils supply also lags demand in June 2025, triggering drop in stocks to lowest in more than a decade.

·         Lower-than-usual supply contrasts with higher-than-usual domestic demand, mirroring similar dynamic in South Korea.

·         Tighter supply cuts volumes available for export, squeezing availability of Group I base oils for overseas markets.

·         Drop in exports coincides with dip in Group I shipments from Middle East in June-July 2025, and Group I plant-maintenance in Thailand in July 2025.

·         Singapore’s base oils exports show signs of falling sharply in July 2025 from previous month, adding to signs of tighter-than-expected supply in Asia-Pacific region.

·         Taiwan’s base oils exports hold firm in July 2025 even with slowdown in shipments in second half of the month.

·         Saudi Arabia’s base oils cargo exports show signs of slipping in July 2025 from previous month.

·         Asia’s premium-grade base oils imports from Middle East fall to four-month low in June 2025.

·         Imports fall amid slump in shipments from Qatar that coincides with maintenance-work at base oils units in Bahrain and UAE in Q2 2025.

·         Drop in imports could add to Asia’s tighter-than-expected supply at start of Q3 2025.