Asia base oils demand outlook: Week of 11 Nov

·        Asia’s base oils demand could turn more muted as prospect of slowing consumption and improving supply curbs urgency to lock in additional volumes.

·        High base oils values relative to feedstock and competing prices point to tighter supply-demand dynamics.

·        Asia’s lube demand instead likely to stay lower at year-end and start of 2025.

·        Seasonal slowdown in demand and signs of weaker consumption add to attraction for blenders to maintain lower stocks and to procure smaller volumes more frequently.

·        Prospect of weaker demand and rising supply could raise expectations of adjustment in base oils prices to reflect the weaker fundamentals.

·        Those expectations could add to buyers’ preference to hold back, putting more pressure on demand.

·        China’s demand for overseas supplies likely to provide more limited support.

·        China’s premium of domestic prices for imported Group II base oils over FOB Asia cargo prices extends fall, adding to signs of more muted demand for overseas supplies.

·        Higher domestic base oils production in China gives domestic blenders the option of maintaining lower stocks until after the lunar new year holidays in Feb 2025.

·        Blenders could tap domestic supplies to cover any signs of stronger-than-expected demand.

·        Still-firm base oil values versus domestic diesel prices point to relatively steady demand so far.

·        Southeast Asia’s lube demand already shows signs of rising more slowly than usual in month of September from previous month.

·        Thailand’s lube demand falls in Sept 2024 for second month from year-earlier levels.

·        Weaker consumption in markets like Thailand triggers fall in Asia’s lube demand in Sept 2024 for third month from year-earlier levels.

·        Weaker lube demand cushions impact of drop in Asia’s base oils supply in Sept 2024.

·        Weaker lube demand, combined with seasonal slowdown in consumption in Q4 2024, adds to attraction for blenders to maintain lower stocks.

·        Singapore accounts for growing share of Thailand’s base oils imports in Sept 2024 and in Jan-Sept 2024.

·        Singapore’s share rises at expense of supplies from South Korea, whose share falls in 2024 to lowest in at least five years.

·        Thailand’s reliance on imports of premium-grade base oils for all its Group II/III requirements makes it a key market for Singapore and South Korea.

·        Buyers in India could start to get more leverage in coming weeks amid expectations of pick-up in shipments from South Korea following completion of plant maintenance work in the country.

·        More feasible arbitrage from US could also facilitate pick-up in shipments from that country to India.

·        Expectations of improving availability and subsequent price-pressure could prompt buyers to limit moves to replenish stocks.

·        Expectations of improving availability and downward price pressure could dampen interest in US supplies whose prices could be competitive currently, but less so by the time any shipments reached India.

·        Dynamic raises prospect of pick-up in demand for US supplies when buyers are more confident that prices have bottomed out.

·        Buyers face challenge of balancing expectations of lower prices with likely need to replenish low stocks.

·        India’s lube demand rises in Oct 2024 for sixth time in seven months.

·        Rising demand likely to keep India’s supply-demand balance tighter than usual.

·        Rising demand contrasts with signs of tighter supply in recent weeks as likely dip in flows from key sources like South Korea counter steady flows from Singapore and Saudi Arabia.

·        Drop in shipments, rising domestic demand and blenders’ lower stocks likely to sustain firm buying interest for additional supplies.

·        Moves to replenish stocks and expectations of lower prices could boost interest in supplies with a shorter time period between procurement and delivery of the shipments.

·        Pakistan’s base oils imports account for more than 72% of country’s supply in Sept 2024 for second time in a row, up from 66% share in 2023.

·        Imports’ share of Pakistan’s supply likely to hold firm or rise further if country’s economy extends recovery and lube demand rises.

·        Pakistan’s total reliance on overseas supplies for premium-grade base oils likely to add to demand for imports.

·        Pakistan’s imports of Group II heavy-grade base oils continue to account for growing share of country’s total imports in Sept 2024.

·        Pakistan’s rising demand for imports and rising demand for Group II heavy grades boosts incentive for overseas refiners to increase their share of the country’s shipments.