Asia base oils demand outlook: Week of 24 Feb

·         Asia’s base oils demand likely to get support ahead of seasonal rise in lube consumption in month of March.

·         Steady-to-higher prices and round of plant maintenance work in Asia add to incentive to lock in sufficient supplies.

·         Demand in China shows signs of staying more muted than usual at time of year when its requirements typically peak in preparation for spring oil-change season.

·         More muted demand in China could free up more supplies for other markets.

·         Sustained fall in China’s domestic Group II N150 premium to Shandong diesel prices points to weaker-than-usual demand for the time of year.

·         Premium of China’s domestic Group II N150 over FOB Asia cargo price extends slide.

·         Falling premium points to weaker demand for additional supplies from overseas markets, at time of year when imports typically peak.

·         Premium of domestic Group I brightstock over FOB Asia cargo price stays lower than usual for time of year, despite China’s structural shortage of the product.

·         Lower-than-usual demand for additional overseas volumes of brightstock frees up more supplies for other markets.

·         Demand in southeast Asia likely to hold firm even with pick-up in shipments to the region.

·         Singapore’s base oils exports rebound to southeast Asia, China and India last week, triggering surge in four-week exports to those markets.

·         Rebound in shipments could reflect revival in demand for replenishment supplies ahead of seasonal rise in consumption at end-Q1 2025.

·         Rebound in shipments could reflect revival in demand to balance out more limited volumes from other sources during and ahead of widespread round of plant maintenance work in Asia.

·         South Korea’s base oils exports to southeast Asia rebound in Jan 2025, even as shipments to other markets extend slide.

·         Rise in shipments points to pick-up in exports to southeast Asia from Asia’s largest suppliers.

·         Rise in shipments adds to signs of stock-replenishment in southeast Asia ahead of expected tightening of market fundamentals later in Q1 2025.

·         Singapore’s average bunker fuel sales per vessel fall in Jan 2025 for second month from year-earlier levels to lowest since late-2023.

·         Slowdown in bunker fuel sales likely triggers similar dip in marine lube sales, and the base oils used to produce marine lubricants.

·         India’s demand for base oils from less regular sources likely to get support from sustained slowdown in South Korea’s exports to the country.

·         Slowdown likely to continue at least through Q1 2025 as plant maintenance in South Korea cuts supply.

·         India also faces prospect of slowdown in shipments from Saudi Arabia after dip in exports from Yanbu and Jeddah in Jan 2025.

·         Simultaneous dip in shipments from two of India’s main suppliers would increase pressure to line up additional shipments from other sources.

·         Surge in India’s imports of Group I and Group II heavy grades in Jan 2025 partly reflects buyers’ success in locking in supplies from other sources like US and Iraq.

·         Tighter availability in Asia increases importance of sustaining flow of supplies from other sources.

·         Premium of CFR India Group II heavy-grade price over US export prices widens in Feb 2025, facilitating additional arbitrage opportunities from that market.

·         Premium of CFR India Group II heavy grades over FOB Asia prices also widens in Feb 2025, after slumping in Jan 2025.

·         Wider premium points to more limited availability of heavy grades from other sources and need to secure more supplies from Asia.

·         Premium stays well below year-earlier levels, leaving arbitrage hard to work.