Asia base oils demand outlook: Week of April 1

·        Asia’s base oils demand could start to ease as the prospect of improving availability and a seasonal dip in lube consumption curb blenders' urgency to buy.

·        Any signs of increasing surplus supply could curb room for additional rise in prices, further slowing buyers’ urgency to lock in supplies.

·        Asia’s Group II heavy-grade differential to Group I SN500 extends strong rebound since early this year.

·        Sustained rebound could reflect structural changes as regional market adapts to fall in Group I supply, triggering rise in Group II base oils consumption.

·        Asia’s lube demand likely to fall in Q2 2024 from Q1 2024 amid seasonal slowdown in month of April.

·        Slowdown in lube demand raises prospect of rise in surplus base oils supplies if regional output holds steady or rises.

·        Such a scenario would repeat the same trend in April 2022 and April 2023.

·        Such a scenario increases incentive/need for refiners to adjust output or to adjust prices to make arbitrage workable to other regions.

·        China’s domestic base oils demand shows signs of staying relatively muted, with sufficient supplies to meet demand for most base oils grades.

·        China’s domestic Group II N150 premium to diesel prices improves to one-month high but remains well below year-earlier levels.

·        Rangebound premium points to sufficient supply to meet demand.

·        Arbitrage to move Group II supplies from Asia to China stays harder to work, especially compared with same time a year earlier.

·        Brightstock remains an outlier.

·        Domestic China brightstock premium to FOB Asia and CFR India prices widens further, adding to attraction of moving more arbitrage shipments to China.

·        Singapore’s base oils exports to China pause last week, leaving shipments in March 2024 down sharply from March 2023.

·        Slowdown in shipments coincides with plant maintenance in China, suggesting domestic blenders prefer to maintain low inventories.

·        Singapore’s base oils exports to southeast Asia account for almost all the island-state’s shipments last week.

·        Firm flows trigger rebound in Singapore’s exports to southeast Asia in March 2024 after slowdown in Feb 2024.

·        Trend points to ongoing focus on tapping steadier demand requirements in southeast Asia market.

·        India’s demand could stay firmer for longer as slowdown in imports from Saudi Arabia curbs flows from one of India’s logistically closest sources.

·        Drop in imports from Saudi Arabia slows recovery in India’s base oils supply following sharp fall in supply surplus in Feb 2024.

·        Demand for overseas supplies likely to get further support until country’s domestic base oils production reverts to more typical levels.

·        Firmer demand shows signs of attracting more supplies from South Korea.

·        Trend raises prospect of pick-up in shipments from South Korea and US reaching India in April 2024.

·        CFR India Group II N150 premium to FOB NE Asia prices extends sharp slide for third week to lowest in a month.

·        Any extension of that trend would make arbitrage to India more complicated and could point to change in India’s supply-demand fundamentals.

·        India’s retail diesel premium to CFR India N70 prices falls to four-month low in March 2024.

·        Fall in premium gathers pace after India’s refiners cut retail diesel prices last month for first time since May 2022.

·        Lower premium often coincides with drop in demand for very-light grade base oils.