Asia base oils - week of Jan 29: Demand outlook

·        Asia’s base oils demand likely to get support from expectations of steady-to-higher prices amid rising crude/diesel prices.

·        Demand could get further support as blenders seek to secure sufficient supplies to cover expected rise in lube demand.

·        Asia’s lube demand likely to rise strongly at end-Q1 2024 before falling at start of Q2 2024.

·        Seasonal rise in demand coincides with signs of tighter surplus base oils supply amid scheduled and unplanned plant shutdowns in the Asia-Pacific region.

·        Stronger demand and tighter supply could prompt blenders to seek to maximise delivery of term supplies or seek additional supplies.

·        Stronger demand and tighter supply could trigger rise in buying interest for supplies from other regions.

·        China’s domestic Group II base oils premium to fob Asia prices steadies after rising strongly since early Dec 2023.

·        Firmer premium coincides with signs of strong pick-up in shipments from key overseas sources to China in Jan 2024.

·        Rising Group II premium points to domestic demand that is strong enough to absorb healthy availability of domestic supplies and rising volumes from overseas sources.

·        Strength of Group II premium to fob Asia prices is relative – it was at much higher levels in Q1 2023.

·        Singapore’s December base oils exports to China hold firm even as total exports fall.

·        Trend adds to signs of pick-up in Chinese demand in recent months.

·        Singapore’s base oils exports to China extend rise through Jan 2024.

·        Extent/sustainability of Chinese demand after lunar new year holidays set to have widespread impact on regional supplies.

·        Chinese demand was weaker than expected after lunar new year holidays in Q1 2023.

·        China’s base oils imports fall in 2023 to lowest in at least seven years.

·        Trend highlights China’s growing self-sufficiency and weaker demand, and importance for regional refiners to target other markets instead.

·        Pakistan’s November lube demand rises for fifth month, while base oils supply falls.

·        Trend raises prospect of rise in demand for base oils supplies to meet recovery in lube consumption.

·        Slump in Pakistan’s Group I base oils output adds to signs of rising demand for premium-grade base oils.

·        Rising lube demand and rising demand for premium-grade base oils likely to benefit South Korean refiners, whose share of Pakistan’s base oils imports surged in 2023.

·        India’s demand for Group II supplies from Asia could rise amid signs of slowdown in shipments from Saudi Arabia.

·        India’s demand for very-light grade base oils cargoes could rise as buyers seek to lock in supplies before expected rise in prices.

·        Demand could ease once supplies reflect higher regional diesel prices.