· Asia’s base oils demand shows signs of slowing, with buyers comfortable with current stocks, making arbitrage from regional refiners harder to work.· Firm base oils values versus feedstock prices, expectations of healthy availability of supply and prospect of rise in surplus volumes add to attraction for buyers to hold back.· Demand in markets like India and Middle East shows little reaction to signs of tighter availability of supply in the US.· Muted reaction reflects expectations of sufficient alternative sources of supply to cover demand..· China’s domestic price for imported Group II base oils stays high versus Shandong diesel prices and versus Group II supplies from domestic producers..· Trend could point to stronger demand for imported Group II base oils.· Trend could point to pressure on importers with term supplies to raise prices in response to high FOB NE Asia cargo prices relative to domestic Chinese prices.· Steep price premium for imported supplies versus supplies from domestic producers boosts attraction for blenders to maximise consumption of supplies from domestic producers.· Any such move compounds difficulty for importers with term supplies, boosting their incentive to redirect shipments to other markets instead.· Move would add to regional supplies targeting other markets as discount of FOB NE Asia Group II cargo prices to Group II prices from domestic suppliers continues narrow, keeping arbitrage shut..· Narrowing discount coincides with shutdown of several Group II base oils units in China from May 2024.· Closed arbitrage and lower domestic supply points to muted domestic demand..· India’s base oils demand could stay more muted after wave of imports in April-May 2024 replenished blenders’ stocks.· Buyers have incentive for prices to hold relatively steady over coming weeks as they work down existing supplies that they procured in Q1 2024 at lower price levels.· Buyers could be interested in discounted prices for additional supplies for delivery in several months’ time..· Singapore’s base oils exports to India stay higher than usual over last four weeks, adding to surge in shipments to the country in April 2024..· Rise in shipments adds to higher-than-usual India-bound volumes from other markets in April and May 2024.· Trend reflects India’s ongoing role as key outlet for surplus supplies from other markets.· Any change in that role would complicate overseas refiners’ ability to clear surplus supplies from their markets.· That role faces prospect of change as new production capacity starts to come online in India over the coming months..· That role is changing even before new production capacity comes online as CFR India prices fall, slashing further their differential to FOB cargo prices in Asia and US..· Trend points to more muted demand unless prices are at more competitive levels..Global base oils demand outlook: Week of 20 May
· Asia’s base oils demand shows signs of slowing, with buyers comfortable with current stocks, making arbitrage from regional refiners harder to work.· Firm base oils values versus feedstock prices, expectations of healthy availability of supply and prospect of rise in surplus volumes add to attraction for buyers to hold back.· Demand in markets like India and Middle East shows little reaction to signs of tighter availability of supply in the US.· Muted reaction reflects expectations of sufficient alternative sources of supply to cover demand..· China’s domestic price for imported Group II base oils stays high versus Shandong diesel prices and versus Group II supplies from domestic producers..· Trend could point to stronger demand for imported Group II base oils.· Trend could point to pressure on importers with term supplies to raise prices in response to high FOB NE Asia cargo prices relative to domestic Chinese prices.· Steep price premium for imported supplies versus supplies from domestic producers boosts attraction for blenders to maximise consumption of supplies from domestic producers.· Any such move compounds difficulty for importers with term supplies, boosting their incentive to redirect shipments to other markets instead.· Move would add to regional supplies targeting other markets as discount of FOB NE Asia Group II cargo prices to Group II prices from domestic suppliers continues narrow, keeping arbitrage shut..· Narrowing discount coincides with shutdown of several Group II base oils units in China from May 2024.· Closed arbitrage and lower domestic supply points to muted domestic demand..· India’s base oils demand could stay more muted after wave of imports in April-May 2024 replenished blenders’ stocks.· Buyers have incentive for prices to hold relatively steady over coming weeks as they work down existing supplies that they procured in Q1 2024 at lower price levels.· Buyers could be interested in discounted prices for additional supplies for delivery in several months’ time..· Singapore’s base oils exports to India stay higher than usual over last four weeks, adding to surge in shipments to the country in April 2024..· Rise in shipments adds to higher-than-usual India-bound volumes from other markets in April and May 2024.· Trend reflects India’s ongoing role as key outlet for surplus supplies from other markets.· Any change in that role would complicate overseas refiners’ ability to clear surplus supplies from their markets.· That role faces prospect of change as new production capacity starts to come online in India over the coming months..· That role is changing even before new production capacity comes online as CFR India prices fall, slashing further their differential to FOB cargo prices in Asia and US..· Trend points to more muted demand unless prices are at more competitive levels..Global base oils demand outlook: Week of 20 May
