Asia base oils demand outlook: Week of 13 Jan

·         Asia’s base oils demand likely to be mixed, with softer fundamentals at start of year curbing urgency to buy.

·         Prospect of pick-up in demand and tighter supply later in Q1 2025 could instead prompt moves to lock in supplies early.

·         Rebounding crude oil prices and firm heavy-grade base oils prices could add to incentive to lock in requirements.

·         Asia’s lube demand likely to improve later in Q1 2025, after lunar new year holidays.

·         Firmer demand raises prospect of triggering tighter supply-demand balance later in Q1 2025.

·         More muted lube demand at end-2024 and early this year raises prospect of triggering faster build-up of surplus supplies in short-term.

·         Prospect of tighter fundamentals later in Q1 2025, and weaker current fundamentals, leave buyers with dilemma.

·         Buyers face choice of whether to hold back in response to weaker immediate fundamentals, or to lock in additional supplies earlier in anticipation of tighter fundamentals later in Q1 2025.

·         Lube demand in southeast Asia falls in Nov 2024 for fourth month amid ongoing dip in consumption in markets like Thailand.

·         Singapore’s base oils exports to southeast Asia over last four weeks dip to lowest in more than a month.

·         Fall in exports outpaces drop in shipments to China and India, suggesting slowdown in southeast Asia’s demand extends into start of 2025.

·         Falling demand in southeast Asia and northeast Asia contrasts with rebound in Asia’s base oils supply in Nov 2024, magnifying rise in surplus supply.

·         Weaker demand in those regions increases importance of extension of rise in India’s lube consumption.

·         That scenario shows signs of materialising so far, with India’s lube demand rising in Dec 2024 for fifth month.

·         Trend highlights Asia’s growing reliance on India to support steadier regional demand during H2 2024.

·         Growing reliance increases impact of any slowdown in India’s lube demand growth or any change in India’s base oils demand for overseas supplies.

·         India’s base oils demand for overseas supplies could ease in face of improving domestic supply.

·         India’s base oils supply exceeds demand in Nov 2024 for first time in nine months, reflecting that dynamic.

·         India’s demand faces prospect of lagging supply more frequently this year as wave of new base oils production capacity starts to come online.

·         Any slowdown in lube demand growth would compound the dynamic.

·         Scenario incentivises buyers to limit size of any stock-build, especially in Q2 2025.

·         Scenario gives buyers more leverage to target more competitive prices for overseas supplies, especially compared with prices in other regions like northeast Asia.

·         Any such move could put more pressure on FOB Asia cargo prices, especially when regional supply surplus starts to rise.

·         Premium of India’s imported Group II cargo price to FOB NE Asia price falls in early-Jan 2025.

·         Narrower premium complicates arbitrage, already points to signs of more muted demand for supplies from Asia.

·         India set to take delivery in coming week of cargo that loaded from US in Nov 2024.

·         Shipment follows rise in US exports to India in Nov 2024 to highest level in 2024.

·         India’s easing supply tightness and uncertainty about demand outlook could complicate line-up of additional arbitrage shipments.

·         China’s base oils demand for overseas supplies could stay more muted amid increasingly healthy availability of supply from domestic refiners.

·         Domestic supplies give buyers more flexibility to maintain lower stocks and top up supplies as required ahead of lunar new year holidays from end-Jan 2025.

·         Domestic China Group II light-grade premium to FOB NE Asia Group II N150 price trends lower.

·         Narrower premium complicates arbitrage, adding to signs that domestic supply is sufficient for now.