Asia base oils demand outlook: Week of 16 Dec

·         Asia’s base oils demand likely to stay lower over coming weeks as weak consumption cuts requirements.

·         Prospect of rise in supply surplus, combined with still-firm base oils prices, add to incentive to hold back.

·         Seasonal slowdown in Asia’s lube demand at year-end likely to extend into early next year before consumption revives from month of February.

·         Demand likely slows in Nov-Dec 2024 from Oct 2024, when regional consumption rose to four-month high.

·         Regional demand growth in Oct 2024 remains reliant on ongoing rise in consumption in India.

·         That reliance would magnify regional impact of any slowdown in demand in India.   

·         Growth stays more mixed in other regions like southeast Asia, where consumption edges up by 1% in Oct 2024.

·         Rebound in Asia base oils exports to SE Asia in Oct 2024 matches regional lube demand.

·         Steady or higher exports to southeast Asia through rest of Q4 2024 would likely coincide with drop in lube demand.

·         Trend would trigger build-up of surplus supplies in southeast Asia unless more shipments move to more distant markets instead.

·         There are some signs of such a pick-up in shipments to markets beyond southeast Asia.

·         Taiwan’s base oils exports to southeast Asia slump in Nov 2024 to second-lowest level this year.

·         Slump in shipments contrasts with surge in Taiwan’s exports to UAE to two-year high in Nov 2024.

·         Rise in shipments to UAE points to insufficient buying interest in key markets like southeast Asia.

·         Taiwan also faces competition from South Korea and Singapore for key outlets in southeast Asia.

·         South Korea’s share of Philippines’ base oils imports exceeds Singapore’s share in Oct 2024 for first time in four months.

·         Philippines imports same volume from both markets in Jan-Oct 2024, after importing more from South Korea in 2023.

·         Prospect of rise in India’s self-sufficiency of base oils supply over coming year boosts importance of outlets like Philippines.

·         Singapore’s base oils exports to southeast Asia stay lower over last four weeks, adding to signs of more muted demand in the region.

·         Lower exports contrast with rebound in shipments to China and India, where demand is likely to stay steadier.

·         China’s base oils demand likely to stay rangebound at lower levels over coming weeks.

·         Buyers’ low stocks require more frequent moves to top up inventories, supporting more regular demand.

·         Shutdown of domestic Group II base oils unit from H2 Nov 2024 coincides with rebound in Taiwan’s exports to China in Nov 2024.

·         Pick-up in shipments to China points to signs of still-regular flows this year and ongoing requirements for supplies from Taiwan.

·         Pick-up in shipments follows slide in China’s domestic price for imported Group II base oils relative to prices for domestic supplies since June 2024.

·         Slump in premium makes prices more competitive relative to supplies from domestic refiners, adds to attraction of procuring more supplies from Taiwan.

·         More competitive price at lower level conversely adds to incentive for Taiwan to redirect more shipments to other markets instead.

·         China’s domestic Group II N500 premium to FOB NE Asia price rises to highest since Q1 2023.

·         Surge in premium contrasts with steady, lower N150 premium to FOB NE Asia price.

·         Surge in premium makes arbitrage more feasible, points to need for additional supplies from overseas markets to meet demand.

·         India’s base oils demand shows signs of holding steady to cover immediate requirements rather than to build larger stocks.

·         Taiwan’s base oils exports to India rise to four-month high in Nov 2024.

·         Even larger volume of exports move to UAE, pointing to insufficient buying interest in India for additional supplies.

·         India’s buying interest stays muted even amid signs that any arbitrage shipments from the US could remain smaller and arrive later than expected.

·         India’s base oils imports hold firm in Nov 2024, even with dearth of arbitrage shipments from US.

·         Trend highlights India’s sufficient supplies and lack of need for additional shipments from US even if arbitrage flows lag expectations.

·         India likely to be key outlet for expected rise in surplus supply in Asia-Pacific market in Q4 2024 and early 2025.

·         Such a dynamic curbs further buyers’ need for additional supplies from US.

·         India's buying interest stays muted even with India’s domestic lube consumption continuing to rise in Nov 2024.

·         Rising lube demand sustains buyers’ requirements for regular base oils supplies.

·         Muted buying interest for additional base oils cargoes points to expectations of sufficient supply even with smaller or later arbitrage volumes from other markets.

·         Muted buying interest and lower stocks give buyers leverage to lock in additional supplies if they deem prices to be at more competitive levels.