Asia base oils supply outlook: Week of 12 May

·         Asia’s base oils prices hold firm vs feedstock/gasoil prices, especially for heavy grades.

·         Price-strength suggests supply-tightness continues to outweigh weaker-than-expected demand.

·         That dynamic could ease as weak demand cushions impact of recent/ongoing plant maintenance, speeds up refiners’ stock-replenishment once plants resume operations.

·         That dynamic likely to face even sharper change later in Q2 2025 as seasonal slowdown in demand magnifies drop in consumption, while most plant maintenance draws to a close.

·         Current price-strength incentivizes refiners to maximise output, especially of heavy grades.

·         Asia Group I base oils prices outperform Group II prices since H2 March 2025.

·         Relative Group I price-strength suggests drop in supply during plant-maintenance work has larger impact on Group I base oils than on Group II base oils.

·         Dynamic could be reflection of tighter structural capacity of Group I base oils.

·        Relative Group I price-strength could get ongoing support from additonal plant maintenance work in coming weeks.

·         FOB Asia Group II light-grade price discount to CFR UAE price slips to widest level since June 2024.

·         Widening discount could facilitate removal of additional supplies, slowing any build-up surplus volumes in Asia-Pacific market.

·         Taiwan’s exports see pick-up in shipments of light grades so far in May 2025, although Group II heavy grades account for around half of total exports so far this year.

·         Singapore’s base oils exports revert to more typical levels over last four weeks, following surge, then dip in shipments in recent months.

·         Reversion to more typical levels mostly reflects ongoing rebound in re-exported shipments rather than supplies from domestic refiners.

·         Singapore’s base oils imports from US and Europe stay unusually low over last four weeks after surge in shipments in Q1 2025.

·         Slowdown in supplies from US and Europe could complicate Singapore’s ability to maintain high volumes of re-exported shipments over coming weeks.

·         Singapore’s imports from key sources of Group I base oils stay unusually low over last four weeks, following sharp rise in shipments in Q1 2025.

·         Slowdown in shipments set to coincide with planned maintenance work at Group I plant in Thailand in May 2025.

·         Lack of any pick-up in Singapore imports from Japan suggests any further rise in that country’s exports is benefitting other markets rather than southeast Asia.

·         China’s Group II base oils output rises to six-month high in April 2025 despite round of plant maintenance work.

·         Group II output rises as some domestic Group III refiners switch to producing more Group II base oils.

·         Switch from Group III to Group II follows slump in China’s domestic Group III base oils price premium to Group II price in March-April 2025 to lowest in more than three years.

·         Narrower Group III premium boosts attraction of producing more Group II base oils instead.

·         Switch from Group III to Group II base oils points to rapid adjustment in production.

·         Speed of adjustment suggests refiners respond fast to marked change in price differentials between different products.

·         China’s Group I base oils output falls in April 2025 to lowest since end-2021.

·         Lower output coincides with plant maintenance.

·         Lower output highlights lack of spare production capacity, and exposure that buyers face to tight supply during any periods of lower production levels.

·         India’s base oils output rises to three-month high in March 2025.

·         Higher output suggests any plant maintenance work in March 2025 was relatively light.

·         Higher output, combined with high imports, boost India’s base oils supply to ten-month high in March 2025.

·         Higher supply still lags demand that got seasonal boost in March 2025.

·         Signs of firm import volumes in April 2025 would help to cushion impact of heavier round of domestic plant maintenance in April-May 2025.

·         India’s firming cargo prices relative to FOB Asia prices point to still-tight supply, even with plant maintenance work set for completion by end-May 2025.

·         Global base oils supply falls to twenty-month low in Feb 2025.

·         Supply falls on simultaneous drop in supply in Asia, Europe, Americas and Middle East in Feb 2025 from previous month.

·         Drop in volumes curbs size of supply-build in Q1 2025, coincides with firmer-than-usual global base oils margins during that period.