Asia base oils supply outlook: Week of 17 March

·         Asia’s base oils prices extend rise versus feedstock/competing fuel prices.

·         Increasingly firm margins coincide with closed arbitrage to more distant outlets like Americas, and less feasible arbitrage to logistically-closer markets like India and Middle East.

·         Firm margins and closed arbitrage point to tight supply.

·         Tighter supply reflects impact of plant-maintenance work, and stock-building in preparation for plant maintenance work and for seasonal rise in demand at end-Q1 2025.

·         Dynamic keeps Asia’s base oils exports lower than usual at end-2024 and early 2025.

·         Supply-tightness could now start to ease, even with ongoing plant maintenance work, following completion of stock-building.

·         Closed arbitrage would magnify any improvement in supply by keeping cargoes within the region.

·         Asia’s base oils exports show signs of rising strongly in Feb 2025, adding to recovery in supply.

·         Rise in exports helps to replenish blenders’ stocks ahead of seasonal rise in demand in month of March.

·         Southeast Asia continues to take delivery of unusually large volume of supplies from markets like Europe and US, adding to supply.

·         US Group II N600 price discount to ex-tank Singapore price stays unusually wide.

·         Wide discount adds to attraction of moving more shipments from US to Asia.

·         US base oils exports to Singapore stay high than usual in Jan 2025.

·         Rise in exports raises prospect of pick-up in Singapore’s imports from US in coming weeks.

·         Singapore’s higher-than-usual base oils imports so far this year help to sustain sharp pick-up in its base oils exports in recent weeks.

·         Singapore’s base oils exports stay higher than usual over past week, lifting shipments over last four weeks to highest level in two years.

·         Sustained rise in shipments cushions impact of plant maintenance work in South Korea.

·         Sustained rise in shipments boosts Singapore’s share of supply in key outlets like India and southeast Asia.

·         Larger share of regional markets’ supply would help to facilitate placement of additional volumes when new production capacity in the city-state starts up later this year.

·         Sustained rise in shipments contrasts with sharp slowdown in Taiwan’s base oils exports in H1 March 2025, after surge in shipments in Jan-Feb 2025.

·         Exports of less than 10,000 tonnes in H1 March 2025 fall from more than 24,000 tonnes in H1 Feb 2025.

·         Taiwan’s exports of Group II heavy grades in Feb 2025 climb to highest in more than two years, account for more than 50% of its total exports for a second month.

·         Rise in shipments of heavy grades facilitates blenders’ moves to replenish stocks ahead of seasonal pick-up in demand at end-Q1 2025.

·         With blenders’ stocks replenished, any extension of slowdown in Taiwan’s exports through March 2025 could have more muted impact.

·         Thailand’s base oils supply lags demand in Jan 2025 by largest volume in seventeen months.

·         Shortfall reverses supply-build at end-2024, leaves Thailand with more balanced supplies ahead of seasonal rise in demand at end-Q1 2025.

·         More balanced supplies and firmer demand curb Thailand’s ability and need to offer more surplus volumes through export market.

·         Any subsequent slowdown in Thailand’s base oils exports would coincide with plant maintenance work in southeast Asia and northeast Asia in Q1 2025, sustaining squeeze on Group I supply.