Asia base oils - week of Jan 22: Demand outlook

·        Asia’s base oils demand likely to get support from still-firm Chinese demand, signs of more balanced supply and easing concern about further drop in prices.

·        Any extension of rise in Chinese demand through end-Q1 2024 partly depends on strength of seasonal rise in domestic lube demand after lunar new year holidays.

·        Taiwan’s January base oils exports to China extend rebound, after pick-up in shipments in Dec 2023, amid sustained pick-up in demand into early 2024.

·        Rise in Taiwan's exports to China in Dec 2023 helps to replenish domestic distributors’ depleted stocks.

·        Rise in exports to China in Jan 2024 coincides with fall in premium of domestic prices for imported supplies over prices for domestic supplies.

·        Narrower premium points to recovery in supplies of imported base oils.

·        China’s domestic Group II prices for domestic supplies extend rise vs diesel prices even with rise in supplies.

·        Firm prices and higher supply point to ongoing improvement in domestic demand.

·        Trend mirrors typical seasonal pattern as blenders replenish stocks in preparation for rise in lube demand after lunar new year holidays.

·        Any extension of trend into Q2 2024 would point to more sustained pick-up in demand.

·        Two-month slump in Singapore’s base oils imports from China extends to mid-Jan 2024.

·        Slowdown in shipments points to more limited surplus supply in China, even with higher domestic output.

·        Disconnect adds to signs of firmer domestic demand.

·        South Korea’s December base oils exports to China rise to 10-month high.

·        Rise in shipments provide even more signs of pick-up in China's domestic demand.

·        Any sustained rise in China’s demand for overseas supplies could tighten availability from sources like South Korea.

·        Any such move would coincide with lower regional Group II prices versus feedstock/competing fuel prices, curbing incentive for regional refiners to raise output.

·        South Korea’s December base oils exports to Japan rise year-on-year for fourth month.

·        Rise in shipments coincides with closure of base oils plant in Japan in Q4 2023.

·        Rise in shipments points to rise in Japan’s demand for premium-grade supplies from overseas markets to cover for drop in domestic supply.

·        Rise in India’s base oils imports at end-2023 likely left blenders with healthy inventories, curbing urgency to secure additional volumes unless prices are deemed to be competitive.

·        Recent rise in cfr India Group II price premium to fob Asia prices could point to concern about tighter availability of overseas supplies in coming months.

·        Prices rise even amid sharp pick-up in Taiwan’s base oils exports in Jan 2024.

·        Rise in prices coincides with prospect of delays to shipments from sources like Saudi Arabia and US.

·        Any such trend would boost competition for supplies from Asia.

·        India’s demand for very-light grade base oils could get support at a time when domestic retail diesel prices are at a five-month high vs light-grade prices.

·        Any pick-up in demand could coincide with tighter supplies if regional refiners respond to lower margins and redirect very-light grade supplies back into the diesel pool.

·        India’s Group III 4cst base oils imports stay high in December, surge in 2023.

·        Trend could change this year after new production capacity in India starts operations.

·        Any slowdown in India’s Group III base oils imports would add to pressure on overseas refiners that already face more muted demand in US, Europe and China.