Asia base oils demand outlook: Week of March 18

·        Asia’s base oils demand could face pressure from signs of balanced supply, limited stock-building, and typical slowdown in lube demand at start of second quarter of the year.

·        Typical slowdown in lube demand at start of second quarter could incentivize blenders to maintain lower stocks.

·        Closed arbitrage to more distant markets sustains prospect of sufficient regional supply, curbing need to procure larger volumes.

·        China’s demand for regional base oils shipments could hold steadier, even if still at lower levels, if the market avoids a repeat of the surge in imports that it faced this time last year.

·        Signs of steady flows from Singapore and lower volumes from Taiwan in H1 March 2024 raise the prospect of avoiding a repeat of last-year’s supply-build.

·        China’s domestic Group II price premium to fob Asia cargo prices narrows further, curbing prospect of any sharp pick-up in shipments to China over the coming weeks.

·        Total exports from South Korea, Singapore and Taiwan to China in first two months of 2024 fall 15pc from year-earlier levels.

·        Drop in shipments points to signs of more balanced supplies in China.

·        Steady demand for overseas shipments at lower levels suggests domestic buyers prefer to maintain low stocks and replenish inventories more frequently.

·        Signs of pick-up in China’s base oils exports point to sufficient supplies to meet domestic demand.

·        China’s Group II domestic price premium to Shandong diesel prices extends fall, adding to signs of sufficient supply and relatively muted demand.

·        Taiwan’s February base oils exports slump from previous month following unplanned plant shutdown in late-Jan 2024.

·        Fall in total exports and in shipments to China has limited impact on China’s domestic prices.

·        China’s domestic price for imported Group II supplies rises relative to prices for domestic supplies in Feb 2024, before easing in March 2024.

·        Muted size of price rise suggests China’s supply remained sufficient even with lower-than-expected supplies from Taiwan.

·        Trend suggests China’s buyers prefer to maintain lower stocks even ahead of seasonal pick-up in lube demand.

·        Trend suggests China’s buyers expect rise in lube demand to be relatively weak, with domestic supplies sufficient to cover requirements.  

·        India’s Group II prices maintain unusually steep premium to US export prices, maintaining attraction of moving arbitrage shipments to India.

·        Open arbitrage follows fall in India’s February base oils imports, excluding very-light grade base oils, to four-month low.

·        Slowdown in shipments ahead of peak-demand season in month of March could spur pick-up in buying interest to replenish stocks.

·        India’s demand for very-light grade base oils likely to hold firm as CFR India N70 price discount to domestic retail diesel prices stays relatively wide.

·        Wide N70 price discount to diesel prices in early 2024 coincides with pick-up in light-grade imports in Feb 2024.

·        Asia’s January lube consumption rises more than expected on strong demand in northeast and southeast Asia.

·        Demand rises despite weaker consumption in India and muted Chinese demand for overseas base oils supplies.

·        Trend highlights size and diversity of different markets throughout Asia region and attraction for refiners to target those markets.

·        Asia’s rising lube demand in early 2024 cushions impact of rise in base oils supply, limiting regional supply-build.

·        Prospect of slowdown in lube demand at start of Q2 2024 could increase impact of any rise in base oils supply.

·        Start of fasting month of Ramadan could curb demand in markets like Indonesia even earlier.