Asia base oils demand outlook: Week of 18 Nov

·        Asia’s base oils demand likely to stay lower as seasonal dip in consumption coincides with signs of earlier-than-expected pick-up in supply.

·        Asia’s base oils prices remain high vs feedstock/gasoil prices, pointing to tighter supply-demand fundamentals.

·        Easing demand and improving supply raise expectations of lower base oils prices, adding to buyers’ preference to hold back.

·        China’s base oils demand for overseas supplies likely to stay muted as buyers maintain lower stocks and cover more requirements with supplies from domestic producers.

·        China’s base oils demand for overseas supplies likely to get boost when buyers need to cover for lower domestic supply.

·        Prospect of lower domestic Group II base oils output in China in coming weeks could duly boost demand for overseas supplies.

·        Any such boost in demand for overseas supplies could be smaller than usual as drop in output coincides with seasonal dip in consumption.

·        China’s domestic Group II base oils price premium to FOB NE Asia prices holds relatively firm and in narrow range since H2 Sept 2024.

·        Steady premium could support arbitrage to line up additional shipments from markets like South Korea.

·        Demand for supplies from markets like South Korea could get further boost in place of sustained dip in shipments from Taiwan to China.

·        China accounts for less than 20% of Taiwan’s total base oils exports in Oct 2024.

·        China’s shrinking imports from Taiwan likely reflects more the impact of its growing domestic supply, in addition to weak domestic demand.

·        Removal of tariff concessions for shipments from Taiwan in June 2024 cuts further the attraction of supplies from Taiwan.

·        Southeast Asia base oils demand could ease in response to expected slowdown in lube consumption and signs of improving base oils supply.

·        Base oils exports to southeast Asia from key regional suppliers revert to more typical levels in Oct 2024, reflecting signs of improving supply.

·        Shipments from Singapore account for growing share of base oils imports in key markets in southeast Asia in first nine months of 2024, while South Korea’s share falls.

·        Prospect of rising base oils supply in Asia-Pacific region in coming year boosts importance of markets like southeast Asia and adding to market share in those outlets.

·        Singapore’s share of Philippines’ base oils imports exceeds South Korea’s share for third month in Sept 2024, reflecting trend of its growing market share in southeast Asia.

·        South Korea’s share exceeded Singapore’s share during previous seven months to June.

·        India’s base oils demand could turn more muted amid expectations of improvement in supplies over coming months.

·        India’s base oils imports fall less than expected in Oct 2024 as rise in shipments from Middle East cushions dip in supplies from South Korea.

·        Smaller-than-expected fall in imports curbs pressure on blenders’ inventories.

·        Higher-than-expected stocks give blenders leverage to hold back for longer.

·        Expectations of lower prices and easing supply-tightness over coming months add to incentive to hold back for now.  

·        India’s Group II heavy-grade base oils imports fall to seventeen-month low in Oct 2024.

·        Pick-up in imports of Group I heavy-neutrals base oils helps to cushion slowdown in heavy-grade supplies.

·        Trend cuts Group II share of Group I/II heavy-grade imports to seven-month low.

·        Trend suggests that buyers continue to have flexibility to use Group I base oils instead of Group II base oils if availability and price incentivize such a move.

·        India’s imported Group II heavy-grade prices improve relative to FOB NE Asia prices since start of Q4 2024.

·        But CFR India N500 price differential remains low versus first five months of 2024.

·        Relative price weakness could reflect pressure from steady availability of Group I supplies.