· Asia’s base oils demand could get support from blenders’ moves to start to lock in supplies for delivery later in Q3 2024.· Signs of more balanced-than-usual fundamentals at start of Q3 2024 and firm crude oil prices curb risk of sharp price correction.· Prospect of limited downward price pressure could add to blenders’ willingness to start negotiations for shipments for delivery later in Q3 2024..· China’s base oils demand shows signs of holding steady at lower levels.· But tighter domestic supply could boost demand for overseas supplies, especially of Group II heavy grades.· China’s domestic Group II base oils prices hold steady versus diesel prices and rise versus FOB NE Asia prices in June 2024, when domestic output fell to a seven-month low.· Price strength extends into early July 2024, contrasting with weaker FOB Asia prices.· Domestic China price response to lower output leaves arbitrage still hard to work, but more feasible than in recent months..· Base oils demand throughout rest of Asia faces seasonal slowdown ahead of likely drop in lube consumption in month of August.· Slowdown at start of Q3 2024 reflects seasonal factors more than concern about build-up of large surplus supply during Q2 2024.· Lube demand shows signs of holding firm at least through May 2024, limiting size of build-up of surplus base oils supplies in the region.· More limited build-up of surplus supplies gives refiners more options to manage impact of seasonal slowdown in demand at start of Q3 2024.· Japan’s domestic base oils/lube demand extends rise in May 2024 for fourth time in five months.· Rising demand compounds impact of Japan’s falling base oils supply.· Domestic demand accounts for almost all of Japan’s base oils supply in May 2024..· Domestic demand typically accounted for around 70% of Japan’s total base oils supply in 2023.· Stronger domestic demand and lower output curb volume of supplies available for export..· Thailand’s May lube demand growth gathers pace after consumption flatlined or fell during the previous three months..· Rising lube demand so far this year coincides with pick-up in base oil imports and lower domestic base oils output.· Trend points to rising demand for premium-grade imports and shrinking demand for Group I base oils.· Scenario could free up more domestic Group I supplies for export to overseas markets.· Scenario could also incentivize domestic refiners to maintain lower run-rates in view of lower prices for export shipments than prices for domestic sales.· Thailand refiners’ Group I supply surplus rises in May 2024 even with firm domestic lube demand and rise in base oil exports..· Rising surplus adds to attraction of maintaining lower run-rates..· India’s more muted base oils demand in recent weeks coincides with sharp slowdown in Singapore’s base oils shipments to the country over the past month..· Any extension of that trend from other sources would speed up consumption of Indian buyers’ large stocks.· CFR India Group II price premium to FOB NE Asia prices stays too narrow to make arbitrage feasible.· But CFR India premium continues to widen gradually.· Any continuation of that trend would start to make the arbitrage more feasible in a few weeks’ time.· Prospect of buyers’ drawdown of current stocks over the coming weeks, and preparation for a seasonal pick-up in consumption from end-Q3, likely to support pick-up in buying interest in few weeks’ time..China’s June base oils output falls.Thailand’s May lube demand rises.Japan’s May base oils supply lags demand
· Asia’s base oils demand could get support from blenders’ moves to start to lock in supplies for delivery later in Q3 2024.· Signs of more balanced-than-usual fundamentals at start of Q3 2024 and firm crude oil prices curb risk of sharp price correction.· Prospect of limited downward price pressure could add to blenders’ willingness to start negotiations for shipments for delivery later in Q3 2024..· China’s base oils demand shows signs of holding steady at lower levels.· But tighter domestic supply could boost demand for overseas supplies, especially of Group II heavy grades.· China’s domestic Group II base oils prices hold steady versus diesel prices and rise versus FOB NE Asia prices in June 2024, when domestic output fell to a seven-month low.· Price strength extends into early July 2024, contrasting with weaker FOB Asia prices.· Domestic China price response to lower output leaves arbitrage still hard to work, but more feasible than in recent months..· Base oils demand throughout rest of Asia faces seasonal slowdown ahead of likely drop in lube consumption in month of August.· Slowdown at start of Q3 2024 reflects seasonal factors more than concern about build-up of large surplus supply during Q2 2024.· Lube demand shows signs of holding firm at least through May 2024, limiting size of build-up of surplus base oils supplies in the region.· More limited build-up of surplus supplies gives refiners more options to manage impact of seasonal slowdown in demand at start of Q3 2024.· Japan’s domestic base oils/lube demand extends rise in May 2024 for fourth time in five months.· Rising demand compounds impact of Japan’s falling base oils supply.· Domestic demand accounts for almost all of Japan’s base oils supply in May 2024..· Domestic demand typically accounted for around 70% of Japan’s total base oils supply in 2023.· Stronger domestic demand and lower output curb volume of supplies available for export..· Thailand’s May lube demand growth gathers pace after consumption flatlined or fell during the previous three months..· Rising lube demand so far this year coincides with pick-up in base oil imports and lower domestic base oils output.· Trend points to rising demand for premium-grade imports and shrinking demand for Group I base oils.· Scenario could free up more domestic Group I supplies for export to overseas markets.· Scenario could also incentivize domestic refiners to maintain lower run-rates in view of lower prices for export shipments than prices for domestic sales.· Thailand refiners’ Group I supply surplus rises in May 2024 even with firm domestic lube demand and rise in base oil exports..· Rising surplus adds to attraction of maintaining lower run-rates..· India’s more muted base oils demand in recent weeks coincides with sharp slowdown in Singapore’s base oils shipments to the country over the past month..· Any extension of that trend from other sources would speed up consumption of Indian buyers’ large stocks.· CFR India Group II price premium to FOB NE Asia prices stays too narrow to make arbitrage feasible.· But CFR India premium continues to widen gradually.· Any continuation of that trend would start to make the arbitrage more feasible in a few weeks’ time.· Prospect of buyers’ drawdown of current stocks over the coming weeks, and preparation for a seasonal pick-up in consumption from end-Q3, likely to support pick-up in buying interest in few weeks’ time..China’s June base oils output falls.Thailand’s May lube demand rises.Japan’s May base oils supply lags demand
