· Asia’s base oils demand likely to stay more muted amid slower buying interest in key regional markets.· Expectations that supply is readily available, and concern about exposure to price correction, add to attraction for buyers to maintain lower stocks.· Firm base oils margins coincide with supply-demand fundamentals that remain more balanced than usual so far in Q2 2024.· Prospect of weaker demand and higher supply could complicate sustainability of firm base oils margins. .· Asia’s lube demand likely to hold in a narrower range over the coming months following the seasonal volatility of consumption at end-Q1 2024 and early Q2 2024..· Steadier demand facilitates planning for base oils refiners and for blenders, which are likely to maintain lower stocks heading into the third quarter of the year.· Demand could get further support from signs of supply-demand dynamics that have stayed more balanced than usual for the time of year.· Any extension of more balanced supply-demand dynamics would curb the possibility or size of a price adjustment to help clear surplus volumes.· Any larger-than-usual increase in regional supplies could by contrast increase concern about pressure on prices..· China’s base oils base oils demand shows signs of staying muted.· China’s domestic Group II N150 premium to diesel falls even with shutdown of several Group II base oils units in May-June 2024.· Lower premium and lower supply point to lower demand.· China’s demand for base oils from Taiwan could dip as planned addition of tariffs from mid-June 2024 increases cost of shipments from Taiwan.· Move would add to incentive for domestic buyers to switch supplies to domestic sources.· China’s domestic Group I brightstock premium to FOB Asia prices steadies after falling to lowest in almost four months..· Lower premium erodes attraction of moving more arbitrage shipments to China..· Singapore’s base oils exports show signs of rising in May 2024 to their highest level this year.· Singapore’s base oils exports over last four weeks rise strongly and at the same time to China, India and southeast Asia..· India’s base oils demand could stay more muted as buyers hold back in anticipation of lower prices and rise in surplus supplies in overseas markets in the coming months.· CFR India Group II price differential to FOB NE Asia prices extends slide since early April 2024.· CFR India Group II light-grade price falls at end-May 2024 to steepest discount to FOB NE Asia cargo prices in years..· Discount to FOB NE Asia prices complicates arbitrage, curbing demand.· Firm CFR India N70 premium to Singapore gasoil prices incentivizes Asia’s refiners to maintain or raise output even as demand slows.· Expectations of lower prices incentivize country’s blenders to focus on consuming or selling existing stocks at current, higher price levels.· Move would follow recovery in India’s surplus supplies in April 2024..· India’s surplus of supply over demand likely extended into May 2024 amid signs of still-high base oils imports.· Buyers likely to target another build-up in inventories from end-Q3 2024, ahead of seasonal pick-up in demand in Q4 2024.· Signs of steadier lube consumption in Pakistan and steady drop in country’s base oils output could boost demand for overseas base oils supplies.· South Korea and Singapore would likely be the key beneficiaries of any rise in demand.· Singapore’s share of Pakistan’s base oils imports rebounds in Q1 2024 after slumping in 2023..· Singapore’s market share rises mostly at the expense of South Korea.· Prospect of large rise in Singapore’s base oils production capacity in 2025 boosts attraction of increasing its share of supplies for markets like Pakistan..· Pakistan’s imports of Group II heavy-grade base oils continue to account for more than half its total imports in 2023 and Q1 2024.· Trend contrasts with India, where Group II heavy grades account for around 15% of its total imports during same period.· Trend magnifies importance of Pakistan as market for Group II heavy grades, even though its total imports are much smaller than India’s base oils imports..Global base oils demand outlook: Week of 27 May
· Asia’s base oils demand likely to stay more muted amid slower buying interest in key regional markets.· Expectations that supply is readily available, and concern about exposure to price correction, add to attraction for buyers to maintain lower stocks.· Firm base oils margins coincide with supply-demand fundamentals that remain more balanced than usual so far in Q2 2024.· Prospect of weaker demand and higher supply could complicate sustainability of firm base oils margins. .· Asia’s lube demand likely to hold in a narrower range over the coming months following the seasonal volatility of consumption at end-Q1 2024 and early Q2 2024..· Steadier demand facilitates planning for base oils refiners and for blenders, which are likely to maintain lower stocks heading into the third quarter of the year.· Demand could get further support from signs of supply-demand dynamics that have stayed more balanced than usual for the time of year.· Any extension of more balanced supply-demand dynamics would curb the possibility or size of a price adjustment to help clear surplus volumes.· Any larger-than-usual increase in regional supplies could by contrast increase concern about pressure on prices..· China’s base oils base oils demand shows signs of staying muted.· China’s domestic Group II N150 premium to diesel falls even with shutdown of several Group II base oils units in May-June 2024.· Lower premium and lower supply point to lower demand.· China’s demand for base oils from Taiwan could dip as planned addition of tariffs from mid-June 2024 increases cost of shipments from Taiwan.· Move would add to incentive for domestic buyers to switch supplies to domestic sources.· China’s domestic Group I brightstock premium to FOB Asia prices steadies after falling to lowest in almost four months..· Lower premium erodes attraction of moving more arbitrage shipments to China..· Singapore’s base oils exports show signs of rising in May 2024 to their highest level this year.· Singapore’s base oils exports over last four weeks rise strongly and at the same time to China, India and southeast Asia..· India’s base oils demand could stay more muted as buyers hold back in anticipation of lower prices and rise in surplus supplies in overseas markets in the coming months.· CFR India Group II price differential to FOB NE Asia prices extends slide since early April 2024.· CFR India Group II light-grade price falls at end-May 2024 to steepest discount to FOB NE Asia cargo prices in years..· Discount to FOB NE Asia prices complicates arbitrage, curbing demand.· Firm CFR India N70 premium to Singapore gasoil prices incentivizes Asia’s refiners to maintain or raise output even as demand slows.· Expectations of lower prices incentivize country’s blenders to focus on consuming or selling existing stocks at current, higher price levels.· Move would follow recovery in India’s surplus supplies in April 2024..· India’s surplus of supply over demand likely extended into May 2024 amid signs of still-high base oils imports.· Buyers likely to target another build-up in inventories from end-Q3 2024, ahead of seasonal pick-up in demand in Q4 2024.· Signs of steadier lube consumption in Pakistan and steady drop in country’s base oils output could boost demand for overseas base oils supplies.· South Korea and Singapore would likely be the key beneficiaries of any rise in demand.· Singapore’s share of Pakistan’s base oils imports rebounds in Q1 2024 after slumping in 2023..· Singapore’s market share rises mostly at the expense of South Korea.· Prospect of large rise in Singapore’s base oils production capacity in 2025 boosts attraction of increasing its share of supplies for markets like Pakistan..· Pakistan’s imports of Group II heavy-grade base oils continue to account for more than half its total imports in 2023 and Q1 2024.· Trend contrasts with India, where Group II heavy grades account for around 15% of its total imports during same period.· Trend magnifies importance of Pakistan as market for Group II heavy grades, even though its total imports are much smaller than India’s base oils imports..Global base oils demand outlook: Week of 27 May