Asia base oils supply outlook: Week of 3 March

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

·         Prices get support from expectations of tight supply fundamentals amid round of plant maintenance, combined with seasonal rise in demand.

·         Lower-than-expected arbitrage flows from other markets like US could exacerbate tighter availability of supply.

·         Stock-building by refiners and blenders ahead of plant maintenance adds to supply-tightness.

·         Completion of stock-building process would remove that source of tighter supply.

·         Completion of some plant maintenance removes other sources of tighter supply.

·         Sustained pick-up in Taiwan and Singapore’s base oils exports in recent weeks cushions further any supply tightness.

·         Those various factors could point to market impact of supply-tightness already peaking for some base oils grades.

·         FOB Asia Group I brightstock premium to SN 150 and SN 500 continues to widen.

·         Widening premium suggests Group I supply tightness affects brightstock, with other grades facing much weaker fundamentals.

·         Taiwan and Singapore base oils exports show signs of rising to multi-month high in Feb 2025, partially cushioning impact of plant maintenance work in markets like South Korea and India.

·         Singapore’s base oils exports slow down over past week, still extend surge over past four weeks to highest since Sept 2023.

·         Taiwan’s base oils exports in Feb 2025 show signs of rising to or close to highest in more than a year.

·         Shipments mostly move to southeast Asia and India, with little sign of any significant pick-up in flows to China.

·         Rise in flows to southeast Asia would help to further replenish blenders’ stocks in that market.

·         Group II heavy-grade shipments show signs of accounting for more than half of Taiwan’s total exports in Feb 2025 for second month.

·         South Korea’s base oils output edges higher in Jan 2025.

·         Steady output contrasts with fall in domestic consumption and exports, triggering rise in net supply in Jan 2025.

·         Rise in net supply boosts stocks ahead of plant maintenance from end-Feb 2025.

·         Rise in net supply mirrors similar trend in Sept 2024, when stock-building tightened availability ahead of plant maintenance.

·         Supply tightness then eased during and after plant maintenance in Sept-Oct 2024.

·         Repeat of that trend would mean supply-tightness peaking in Jan-Feb 2025 amid round of stock-building, before easing over following months.

·         China’s premium-grade base oils output shows signs of holding firm in Feb 2025.

·         Even with firm output, China’s base oils supply typically sees pick-up in additional shipments from overseas markets in first quarter of the year to meet seasonal rise in demand.

·         India’s base oils output likely to fall in Feb-March 2025 because of plant maintenance work.

·         Drop in output would follow sustained pick-up in production in three months to Jan 2025.

·         Output set to get boost from start-up of new production capacity in coming months.

·         Output faces pressure to rise to meet sustained rise in domestic lube demand.

·         Saudi Arabia’s base oils shipments from ports of Yanbu and Jeddah show signs of staying lower in Feb 2025 for second month.

·         Asia’s base oils imports from Qatar rebound in Jan 2025 to second-highest level in thirteen months.

·         Rebound in imports follows unusual slump in shipments in Nov 2024 and especially Dec 2024.

·         Rebound in imports points to resumption of more typical flows from Qatar.