Asia base oils demand outlook: Week of 24 June

·        Asia’s base oils demand faces seasonal slowdown over coming weeks.

·        Signs of more limited build-up of surplus supplies in Q2 2024 curbs prospect of large price adjustment.

·        Prospect of relatively steady prices could help sustain buyers’ moves to secure regular requirements.

·        Buying interest shows signs of turning more to supplies for delivery later in Q3 2024, when demand typically revives.

·        That buying interest could provide additional price support.

·        China’s Group II base oils prices point to steadier supply-demand fundamentals, and firm fundamentals for heavy grades.

·        China’s domestic Group II heavy-grade price extends rise vs Shandong diesel prices, vs domestic N150 price and vs FOB NE Asia Group II N500 price.

·        Price strength points to firmer supply-demand fundamentals vs light grades and vs regional prices.

·        China’s domestic Group I brightstock price premium to FOB Asia brightstock prices steadies over past month after falling in April-May 2024, stays high vs typical levels in recent years.

·        South Korea’s base oils exports to southeast Asia rise to fifteen-month high in May 2024.

·        Higher shipment volumes to southeast Asia point to ongoing strength of region’s lube demand following rise in consumption in first four months of this year.

·        Rise in shipments from South Korea coincides with increasingly firm FOB Asia Group III prices relative to US and Europe markets.

·        Singapore’s base oils exports to southeast Asia hold firm so far in June 2024, contrasting slowdown in shipments to China and especially to India.

·        Singapore’s May bunker fuel sales rise for fifth time in six months year-on-year to four-month high.

·        Singapore’s average bunker fuel consumption per vessel rises in May 2024 for sixth month year-on-year to second-highest level in more than seven years.

·        Rising bunker fuel sales on outright basis and per vessel points to rise in Singapore’s marine lube consumption.

·        Rising marine lube consumption would support firm requirements for heavy-grade base oils.

·        CFR India Group II prices hold steady or rise vs FOB NE Asia prices for second week after falling steadily since H2 March 2024.

·        Steadier prices could suggest demand is starting to bottom out.

·        India’s base oils demand could remain more muted for now after imports rise in May to two-year high.

·        Surge in shipments boosts blenders’ stocks.

·        Falling imported cargo prices incentivize blenders to speed up consumption or sale of stocks to limit exposure to any further drop in prices.

·        South Korea’s May base oils exports to India rise to highest in almost three years.

·        Most of the shipments are likely to reach India in June 2024, raising prospect of extending country’s high imports through this month.

·        High shipments likely to sustain blenders’ stocks at more elevated levels.

·        Stocks at higher levels for longer would delay any moves to start to replenish inventories.

·        India’s demand for very-light grade base oils could stay more muted as blenders work down stocks and amid expectations that supply will remain readily available.

·        Blenders’ stocks rise in May 2024 after India’s very-light grade imports rise to two-year high.

·        Recent rise in regional feedstock/gasoil prices cut Asia refiners’ margins in June 2024 compared with Apil-May 2024.

·        But CFR India N70 premium to Singapore gasoil prices stays firm compared with early 2024 and Q3 2023.

·        Still-firm margins could limit any moves by Asia refiners to trim output for now.