Asia base oils demand outlook: Week of 15 July

·        Asia’s base oils demand could start to improve in the coming month as buyers start to eye shipments for delivery in final weeks of Q3 2024.

·        Asia’s lube demand faces seasonal slowdown in coming weeks.

·        Recent slowdown in base oils demand partly reflects expected slowdown in lube demand.

·        China’s domestic Group II price premium to FOB Asia prices continues to trend higher, climbing to highest this year.

·        Firmer premium facilitates arbitrage flows, coincides with domestic Group II plant maintenance work, cutting domestic supply.

·        Firmer premium coincides with rebound in Singapore’s China-bound base oils exports over past four weeks to highest in more than a month.

·        China’s supply could get additional boost if premium of domestic Group II base oils prices for imported supplies over prices for domestic prices extends recent fall.

·        Ongoing fall in premium follows slump in Taiwan’s base oils exports to China in June 2024.

·        High premium had compounded impact of China’s removal of tariff concession on supplies from Taiwan.

·        Any extension of fall in premium would make supplies from Taiwan more competitive, countering impact of removal of tariff concession.

·        Asia’s lube demand rises more than expected in May 2024 amid strong consumption in northeast Asia.

·        Stronger lube demand limits size of build-up of region’s surplus supplies in May 2024.

·        Any extension of the trend would similarly help to limit size of region’s surplus supplies heading into start of Q3 2024.

·        Smaller surplus would ease buyers’ concern about sharp price adjustment, supporting steadier demand.

·        Key markets in southeast Asia see base oils imports hold firm in May 2024 vs previous month.

·        Region’s growing demand and requirement for imports increase attraction/importance for Singapore and South Korea to boost their share of supplies for those markets.

·        Singapore’s market share of base oils imports rises in Indonesia and Thailand in first five months of the year, falls in Vietnam.

·        South Korea’s market share shows opposite dynamic, as well as rising share of Australia’s imports in first four months of 2024.

·        Other markets show different dynamic as tighter regional Group I availability boosts demand for shipments from remaining suppliers.

·        Philippines’ base oils imports from Thailand extend sharp surge in May for fifth month.

·        Surge in shipments leaves Philippines’ Group I imports from Thailand exceeding supplies from Singapore and South Korea combined for the third time in four months.

·        Trend highlights Thailand’s growing leverage and role as key Group I supplier.

·        India’s June lube demand rises for fourth month and at fastest pace this year.

·        India’s lube demand rose in the month of July from June in each of the previous five years.

·        Demand then usually fell in the month of August from July, before rebounding in month of September.

·        Firmer demand in months of June and July would coincide with planned plant maintenance work in India, cutting base oils supply.

·        Firmer demand and lower supply could speed up consumption of blenders’ base oils stocks, and trigger need for larger volumes to replenish those stocks before end of Q3 2024.

·        India’s June base oils imports show signs of falling from previous two months amid slowdown in shipments from South Korea and Singapore.

·        Drop in imports and firm domestic demand would speed up blenders’ consumption of existing stocks.

·        Imports likely to get less support from flows from US in July 2024, following recent wave of shipments from the country in May 2024 and June 2024.

·        Pakistan’s base oils imports continue to trend higher in first five months of 2024 even amid mixed recovery in country’s lube demand.

·        Trend reflects imports’ growing share of country’s total base oils supply and sustained rise in demand for heavy-grade base oils.

·        Singapore’s share of Pakistan’s imports rises sharply in Jan-May 2024, contrasting with drop in South Korea’s share of imports.

·        Singapore’s rising share of Pakistan’s imports precedes surge in island-state’s Group II production capacity in 2025 that will boost requirements for additional outlets.