Asia base oils supply outlook: Week of 6 October

·         Asia’s base oils price-premiums to gasoil recover amid lower crude oil prices.

·         Firmer margins, and signs of crude prices mostly holding in lower range, curb pressure on refiners to adjust base oils output.

·         Rise in Asia’s base oils supply coincides with more muted demand in China and southeast Asia and more complicated arbitrage to move heavy grades to India.

·         Rising supply and weaker regional demand boosts incentive/need to move shipments to more distant markets like Europe.

·         Taiwan’s base oils exports in Sept 2025 include another cargo bound for Europe.

·         Shipment would follow cargo that loaded from Taiwan in Aug 2025 before heading to Europe, with shipment arriving in early-Oct 2025.

·         Pick-up in shipments to Europe would follow persistently high Europe Group II base oil price-premium to FOB Asia cargo prices since late-Q2 2025.

·         Any extension of arbitrage flows from Asia to Europe would add supplies to a Group II market whose fundamentals remained balanced in Q3 2025.

·         Any extension of such flows could also coincide with prospect of slowdown in Group II shipments from Europe to Asia following recent start-up of new Group II unit in Singapore.

·         Arbitrage to move surplus supplies from Asia to Americas stays hard to work.

·         More limited arbitrage opportunities to other outlets could boost volume of shipments targeting Europe.

·         Singapore’s base oils exports show signs of reverting to more typical levels in Sept 2025 after slowdown in shipments in July-Aug 2025.

·         Re-exports of supplies originating from other markets fall as share of Singapore's total exports over last four weeks to lowest level since end-Q1 2025.

·         Waning requirements for supplies from other markets follows recent start-up of new Group II unit in Singapore.

·         Singapore’s base oils imports still surge in past week following arrival of unusually large shipment from UK.

·         Shipments adds to surge in Singapore’s Group I base oils imports over last four weeks.

·         Rise in Group I supplies adds to pick-up in regional availability of the supplies in recent weeks.

·         Prospect of rise in supply in Asia in Q4 2025 could curb impact of plant-maintenance work in Saudi Arabia during most of final two months of 2025.

·         Timing of rise in supply in Asia and plant-maintenance work in Middle East could instead provide opportunity for refiners in Asia to boost market share in markets like India and Middle East.

·         India’s base oils supply could be more balanced heading into start of Q4 2025 amid pick-up in imports in Sept 2025 and steady recovery in domestic output during Q3 2025.

·         India’s base oils output rises in Aug 2025 to highest this year, following completion of protracted round of plant-maintenance work.

·         Output faces prospect of extending rise later in Q4 2025, with new production capacity expected to start up following upcoming maintenance work.

·         Japan’s base oils output falls in Aug 2025 to lowest in more than fifteen years.

·         Size of fall in output outpaces typical drop in production during round of plant-maintenance.

·         Fall in output contrasts with rise in Japan’s total refined-products output in Aug 2025, including sustained jump in asphalt production.

·         Japan’s asphalt production exceeds base oils output in Aug 2025 for second month.

·         Strong rise in Japan’s asphalt output so far in 2025 and sustained slump in base oils output suggests country’s refiners are focusing on producing more asphalt instead of base oils.

·         Any such moves precede expected start-up of new base oils production capacity in Asia and Middle East in H2 2025 and early 2026.

·         Any such moves would trim slightly expected net rise in Asia’s base oils supply in coming months.

·         Any such moves would add to incentive for regional buyers to boost consumption of Group II base oils instead of Group I base oils.