Asia base oils - week of Jan 8: Demand outlook

Asia base oils - week of Jan 8: Demand outlook

·        Asia’s base oils demand could get support from round of stock-replenishment ahead of seasonal rise in lube demand later in Q1 2024.

·        Signs of relatively balanced supply could ease concern about downward price-pressure, adding to buyers’ willingness to start replenishing stocks.

·        China’s domestic Group I bright stock premium to fob Asia prices holds firm close to highest in a year, ICIS data shows.

·        China’s domestic Group II light-grade price premium to fob Asia prices widens to highest in five months.

·        Wider premium makes more feasible the arbitrage to move cargoes from Asia to China.

·        Domestic Group II premium widens even after China’s Group II base oils output rises in December to twenty-one-month high.

·        More feasible arbitrage and rising domestic output point to pick-up in China’s domestic base oils demand, likely in order to replenish low stocks.

·        China’s domestic Group II premium to domestic diesel prices holds firm even amid rising domestic supply and more feasible arbitrage.

·        Trend adds to signs of firmer domestic demand.

·        Firm domestic base oils premium to diesel could also increase expectations of pressure on base oils prices, incentivizing buyers to limit size of stock-replenishment plans.

·        China’s rising base oils output continues to curb any urgency to build larger stocks.

·        Japan’s November base oils/lube demand rises for fourth time in five months.

·        Japan’s November base oils output exceeds demand by smallest amount since first-half 2021.

Surplus falls
Surplus fallsMETI

·        Japan’s firm base oils/lube consumption compounds impact of shrinking domestic production.

·        Trend set to impact trade flows, with base oils imports likely to rise to cover more domestic requirements and exports likely to fall amid dwindling surplus supplies.

·        Thailand’s November lube demand rises for fourth month.

Demand extends rise
Demand extends riseMinistry of Energy

·        Firmer demand points to ongoing recovery in key markets in southeast Asia.

·        Firmer lube consumption absorbs more of region’s base oils supplies, curbing prospect of large supply-build at year-end or need to move large volumes to more distant markets.

·        Thailand’s November base oils demand outpaces supply for third time in four months.

Demand exceeds supply
Demand exceeds supplyMinistry of Energy

·        Thailand’s balanced-to-tight supply, and prospect of plant maintenance work in January, likely to support firm demand for Group I supplies.

·        India’s November base oils supply exceeds demand by largest amount in more than two years.

Surpus surges
Surpus surgesVarious government, customs data

·        Growing surplus curbs Indian buyers’ urgency to procure more supplies, gives them more leverage to hold off until prices move to levels that they deem to be attractive.

Asia base oils - week of Jan 8: Demand outlook
Global base oils - week of Jan 8: Price outlook - margins
Asia base oils - week of Jan 8: Demand outlook
Global base oils - week of Jan 8: Price outlook - arbitrage
Asia base oils - week of Jan 8: Demand outlook
Global base oils - week of Jan 8: Demand outlook

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