Asia base oils supply outlook: Week of 28 April

·         Asia’s Group I/II base oils price premium to feedstock/gasoil prices stays unusually high.

·         High premium points to tight supply-demand fundamentals.

·         Prospect of slowing demand could cushion impact of tight Group I base oils supply in Q2 2025.

·         Prospect of slowing demand could magnify impact of improving Group II base oils supply over coming weeks.

·         Group II supply surplus could stay more limited for now because of ongoing plant maintenance work and refiners’ need to replenish depleted stocks after plant maintenance work.

·         Tighter availability of Group I supplies could support firmer demand for Group II, further slowing build-up of surplus Group II supplies.

·         Any  recovery in Group II supply would increase need for pick-up in arbitrage shipments to markets like Middle East and Americas.

·         FOB Asia Group II price discount to prices in Middle East remains relatively steady for heavy grades, widens for light grades in April 2025.

·         Mixed price trends in Middle East coincide with signs that blenders have sufficient stocks, curbing urgency to lock in supplies if they deem prices to be too high.

·         Mixed price trends suggest sellers face pressure to clear light grades, less pressure to move heavy grades.

·         Taiwan’s base oils exports see marked slowdown in past week after firm export volumes in first three weeks of April 2025.

·         China’s base oils imports rise to one-year high in March 2025.

·         Imports’ share of China’s base oils supply rises to 27% of the total in March 2025.

·         Higher share of imports likely reflects pick-up in term volumes from sources like Singapore to cover for lower domestic output during plant maintenance work.

·         Scenario raises prospect of imports falling back to more typical share of around 20% of total supply once China’s domestic refiners resume normal operations.

·         Singapore’s base oils exports to China stay high so far in April 2025.

·         Firm volumes suggest China’s imports could stay higher than usual in April 2025, with key maintenance work in the country set to end in May 2025.

·         Singapore’s still-firm flows to China contrast with dip in total exports in past four weeks.

·         Drop in shipments suggests rise in exports in Feb-March 2025 was temporary and to cover factors like rise in demand and plant maintenance work in the region.

·         Drop in exports partially cushions impact of rise in supply from other sources as plant maintenance work draws to a close.

·         Singapore’s imports from US and Europe combined rise in March 2025 and Q1 2025 to highest since H1 2021.

·         Shipments likely consist of Group I and Group II base oils.

·         Rise in imports coincides with rise in Singapore’s re-exports of base oils from other markets in Q1 2025 to highest since H1 2023.

·         Rise in imports and re-exports helps to boost Singapore’s total exports, and Asia’s supply of Group I and Group II base oils.

·         Rise in supply helps to cushion impact of heavy round of plant maintenance in Asia.

·         Pick-up in supply precedes expected rise in Singapore’s output and exports following start-up of new production capacity later this year.

·         Recent rise in exports, and in imports from US and Europe, shows signs of slowing sharply to more typical levels in April 2025.

·         Singapore’s base oils exports to southeast Asia exceed South Korea’s shipments to the region in Q1 2025 for second time in a row.

·         Singapore’s exports exceeded South Korea’s exports to the region in just two quarters during the previous four years.

·         Singapore’s rising exports share likely partly reflects impact of plant maintenance in South Korea in Q1 2025.

·         Rising share and volumes also provide Singapore with key outlet for additional supplies following expected start-up of new production capacity in coming months.

·         Asia’s Group I base oils supply set to get further squeeze from ongoing pause in Singapore imports from Italy and UK since early-March 2025.

·         Arrival of shipment from Russia in past week partially cushions slowdown from Europe.

·         Singapore’s Group I base oils imports over last four weeks still dip compared with recent months.

·         Any dip in Singapore’s Group I supply would coincide with maintenance work in Thailand, Japan and Middle East in Q2 2025.