Asia base oils demand outlook: Week of 19 Aug

·        Asia’s base oils demand likely to get support from seasonal pick-up in lube consumption at end-Q3 2024.

·        Muted price adjustments and signs of limited build-up of surplus supply likely to curb concern about exposure to sudden price volatility.

·        Upcoming plant maintenance and open arbitrage to Americas could curb further the volume of surplus regional supplies.

·        Prospect of more balanced fundamentals could incentivize buyers to start to lock in sufficient supplies to meet seasonal pick-up in demand.

·        India’s demand for light-grade base oils could get support as slowdown in imports in recent months trims supply.

·        China’s demand could be more mixed as prospect of pick-up in domestic supply curbs need for top-up volumes from overseas refiners.

·        Seasonal pick-up in demand could sustain requirements for top-up volumes.

·        China’s domestic Group II price premium to FOB NE Asia prices holds close to highest in more than four months.

·        Firm premium keeps arbitrage more feasible, pointing to ongoing interest in top-up supplies from regional market even with prospect of rise in domestic supply.

·        Domestic China Group I brightstock premium to FOB Asia price extends slide to lowest since Nov 2023.

·        Narrowing premium makes arbitrage harder to work, pointing to more muted demand.

·        Asia’s lube demand holds firm in June 2024 and Q2 2024 vs year-earlier levels.

·        Firm demand limits size of build-up of surplus base oils supplies in the region ahead of Q3 2024.

·        Supply surplus falls sharply in Q2 2024 from year-earlier levels more because of rising demand than a drop in supply.

·        Dynamic highlights importance of demand growth to sustain balanced supply-demand fundamentals.

·        That dynamic will need to continue and gather in pace in the coming year, when a swathe of new supply is set to enter the market.

·        South Korea’s base oils exports to southeast Asia rise to 22-month high in July 2024.

·        Rise in shipments highlights importance of southeast Asia as key outlet for South Korea’s supplies.

·        Rise in shipments points to still-firm demand throughout the region, following strong pick-up in consumption at end-Q2 2024.

·        Rise in consumption at end-Q2 2024 left the region with smaller-than-usual overhang of surplus supplies carried into Q3 2024.

·        Indonesia’s base oils imports rise in June 2024 from year earlier on sustained wave of shipments from Singapore.

·        Trend lifts Singapore’s share of Indonesia’s base oils imports to 73% of the total in H1 2024, up from 70% share in 2023 and 56% share in 2022.

·        Trend highlights growing focus on and importance of key regional outlets like Indonesia for refiners in Singapore and South Korea.

·        Both suppliers are reliant on overseas outlets for most of their shipments.

·        Indonesia is reliant on overseas supplies to cover its Group II requirements.

·        China’s growing self-sufficiency and India’s imminent start-up of new production capacity cut the attraction of targeting those markets as outlets for supplies from Singapore and South Korea.

·        Singapore’s share of Thailand and Pakistan’s imports also rises in H1 2024.

·        South Korea’s share of Vietnam and Australia’s imports rises in H1 2024.

·        India’s base oils demand could get support from signs of shrinking inventories as country’s imports fall to four-month low in July 2024.

·        Lower imports and stocks curb impact of seasonal dip in demand in month of August during monsoon season.

·        Lower imports and stocks raise prospect of rise in demand for replenishment supplies for delivery from end-Q3 2024.

·        A pick-up in demand at that time would coincide with plant maintenance-work in South Korea.

·        South Korea’s exports to India already stay lower than usual in July 2024 for a second month.

·        Dynamic raises prospect of sustaining firmer buying interest for supplies from other sources like Singapore and Saudi Arabia over the coming months.

·        India’s CFR Group II light-grade price premium to FOB NE Asia prices holds at highest in four months.

·        India’s CFR India Group II N70 premium to Singapore gasoil prices holds firm, especially compared with year-earlier levels.

·        Firmer premium follows sustained slowdown in imports of Group II light grades in June-July 2024.

·        Firmer premium and tighter supply suggests India’s demand is likely to focus more on light grades than on heavy grades.

·        India’s firm Group II heavy-grade imports contrast with slowdown in Group I heavy-neutrals imports.

·        Trend points to rising consumption of Group II heavy-grade base oils in place of Group I supplies.