Asia base oils demand outlook: Week of 16 Sept

·        Asia’s base oils demand could be more cautious, with buyers procuring sufficient volumes to cover requirements, avoiding moves to build stocks.

·        Recent slide in crude oil prices and surging base oils premium to crude and diesel likely to raise concern that margins are less reflective of current supply-demand fundamentals.

·        Such a dynamic could trigger a price adjustment, with buyers preferring to hold off until any such adjustment is over.

·        China’s Group II and especially Group I heavy neutrals prices extend rise relative to diesel, hold firm or rise vs FOB Asia prices.

·        Strong price levels point to increasingly firm supply-demand fundamentals for heavy-neutrals.

·        Strong prices precede closure of major Group I unit in China in Oct 2024.

·        Plant closure likely to boost demand for replacement-supplies of Group I heavy neutrals.

·        Plant closure could boost demand for Group II heavy neutrals as alternative to Group I.   

·        China’s demand for overseas supplies of Group II light grades could ease as prospect of pick-up in domestic supply boosts attraction of procuring those volumes instead.

·        Singapore’s base oil exports to China extend downward trend over last four weeks to lowest in more than two months.

·        Exports fall despite more feasible arbitrage to move cargoes from Asia to China in recent weeks.

·        Singapore’s base oils exports to India by contrast rise over last four weeks to highest since end-July 2024.

·        Rise in shipments follows signs of tighter base oils stocks in India in Q3 2024, precedes seasonal pick-up in demand over coming weeks and months.

·        Asia’s lube demand falls to five-month low in July 2024, pausing after strong rise in consumption during previous three months.

·        Asia’s lube demand stays unusually firm for month of July even with slowdown.

·        Asia’s average lube demand in three months to July 2024 stays high and much higher than year-earlier levels.

·        Firm regional base oils prices suggest blenders moved to replenish depleted stocks at start of Q3 2024, cushioning impact of rise in supply.

·        Philippines’ lube/base oils imports rise in July 2024 for fourth time in five months.

·        Sustained rise in imports adds to signs of strong lube consumption in southeast Asia market.

·        Philippines’ imports from South Korea and Singapore combined rise to ten-month high, provide another growing outlet for supplies from those sources.

·        India’s lube demand rises in August 2024 for fourth time in five months from year-earlier levels, holds relatively firm vs July 2024.

·        Demand holds firm at a time of year when it typically falls as monsoon rains curb market activity.

·        Typical drop in India’s lube demand often adds to build-up of surplus base oils supplies in Asia-Pacific market in third quarter of the year.

·        Stronger-than-usual demand this year curbs build-up of surplus supplies, complicates Indian blenders’ moves to replenish depleted stocks.

·        Stronger-than-usual lube demand and blenders’ lower stocks raise prospect of supporting stronger buying interest for additional supplies.

·        Stronger buying interest would coincide with closed arbitrage from US in Q3 2024 and plant-maintenance work in South Korea in Sept 2024, curbing supply.

·        Buying interest likely gets further boost after India’s base oils imports fall to seventeen-month low in Aug 2024.

·        India’s CFR Group II N150 premium to FOB NE Asia prices rises to four-month high in Aug 2024, pointing to firmer demand and facilitating arbitrage.

·        Firmer N150 premium coincides with signs of pick-up in shipments from South Korea to India in Aug 2024.

·        Firm N150 premium coincides with signs of pick-up in shipments from Saudi Arabia to India in Sept 2024, as well as large shipment from US to India.

·        India’s CFR N150 premium to FOB NE Asia prices falls in mid-Sept 2024 for first time since end-May 2024.

·        Any extension of that trend could suggest buyers have now secured sufficient volumes to cover requirements.

·        Recent weakness of crude oil prices adds to incentive for buyers to procure sufficient volumes but to hold off building larger inventories.