Asia base oils demand outlook: Week of 15 April

·        Asia’s base oils demand could get support from round of stock-replenishment after seasonal rise in lube consumption in month of March.

·        Prospect of sufficient supply, more muted demand in Q2 2024, and higher prices could curb buyers’ urgency to replenish stocks. 

·        Those factors, combined with less competitive US prices, could curb Asia’s demand for arbitrage shipments from US.

·        FOB NE Asia Group II N500 prices continue to strengthen vs Group I SN 500 and Group III 8cSt base oils prices.

·        Trend could incentivize buyers to seek to use alternative supplies instead of Group II N500.

·        China’s domestic Group II base oils prices fall vs diesel and vs FOB NE Asia prices.

·        Lower premium curbs incentive both for domestic refiners to raise output and for domestic buyers to seek additional supplies from within the region.

·        Lower incentive for additional supplies points to cautious, muted demand.

·        Trend incentivizes Asia’s refiners to continue to focus on moving more supplies to other markets instead.

·        China’s domestic Group I light/heavy-neutrals base oils prices extend rise vs domestic Group II prices and vs FOB Asia Group I prices.

·        Firmer price premium reflects China’s tighter Group I supply fundamentals, coincides with Group I plant maintenance in the country.

·        Singapore takes delivery of more supplies from China last week, extending steady flow of shipments from that market.

·        Steady flows point to sufficient surplus supply in China and sufficiently low domestic prices to sustain the attraction of lining up shipments to move to overseas markets.

·        India’s March lube demand rises to one-year high, before likely slowdown at start of Q2 2024.

·        Higher demand likely outweighs supply in March 2024, triggering need for Indian buyers to replenish stocks.

·        Prospect of pick-up in arrival of shipments from South Korea and US in April 2024, and signs of steady flows from Saudi Arabia, likely to boost buyers’ inventories.

·        Buyers' higher stocks, and prospect of steadier lube demand over coming months, curb pressure to add to inventories at a time when prices continue to trend upwards.

·        Expectation of healthy availability of supply curbs further any urgency to build larger stocks, instead incentivizes blenders to procure supplies as and when required.

·        Asia’s February lube demand falls for first time in four months; slowdown may partly reflect timing of lunar new year holidays, which fell in month of February this year.

·        Asia’s February lube demand falls less steeply than fall in region’s base oils supply, triggering drop in surplus of supply over demand to lowest level in seven months.

·        Small surplus in Feb 2024 curbs volume of arbitrage supplies available for shipment from Asia to more distant markets in Q1 2024.

·        Small surplus precedes seasonal rise in demand in the month of March, raising prospect of leaving refiners and blenders with balanced-to-low supplies at start of Q2 2024.

·        More balanced fundamentals at start of Q2 2024 would give refiners more leverage to avoid large build-up of surplus supplies if they were to adjust output levels in response to slowdown in demand.

·        Prospect of seasonal slowdown in demand at start of Q2 2024 could curb blenders’ urgency to replenish depleted stocks.

·        Rising prices and expectations of sufficient supply add to attraction of maintaining lower stocks.