Asia base oils demand outlook: Week of 19 May

·         Asia’s base oils demand could see earlier-than-usual seasonal slowdown in face of weak lube consumption and improving supply.

·         Asia’s lube demand falls at end-Q1 2025 from year-earlier levels.

·         Demand weakness shows signs of extending into Q2 2025 as uncertainty about US tariffs compounds signs of slowing economic growth.

·         Weak demand curbs blenders’ urgency to replenish stocks.

·         Weaker demand and uncertainty about outlook instead incentivizes blenders to keep lower inventories.

·         Weaker demand coincides with tighter supply at start of Q2 2025.

·         Weaker demand set to coincide with rising supply in final weeks of Q2 2025 as wave of plant maintenance work mostly draws to a close.

·         Weaker demand, rising supply and firm base oils margins could incentivize blenders to procure sufficient supplies just to cover term requirements.

·         China’s base oils demand likely to ease as seasonal slowdown in consumption and rising domestic supply cuts requirements for overseas supplies.

·         China’s domestic Group II N150 premium to FOB Asia cargo price extends rise to highest since early-Oct 2024.

·         Wide premium boosts feasibility of moving arbitrage shipments to the country.

·         Wide premium points to firmer-than-expected demand or tighter-than-expected supply, or domestic prices that could face pressure to close the arbitrage.

·         Any pick-up in arbitrage shipments, combined with weak demand fundamentals, could exacerbate a build-up of surplus supplies.

·         Base oils demand in southeast Asia likely to stay muted and reliant on blenders’ moves to replenish lower stocks.

·         Seasonal slowdown in demand from end-Q2 2025 likely to limit scope of any such stock-replenishment.

·         Thailand’s lube demand falls in March from month of February for first time in more than a decade.

·         Demand slows at a time of year when it usually gets a seasonal boost.

·         Weaker demand in month of March shows signs of extending to other markets in southeast Asia such as Vietnam and Philippines.

·         Weaker demand triggers fall in southeast Asia’s lube consumption in March from year-earlier levels at fastest pace in ten months.

·         Shrinking lube demand leaves blenders' base oils stocks lasting longer, curbing urgency to replenish inventories.

·         Asia’s base oils exports to southeast Asia exceed the region’s lube demand in March 2025 by larger-than-usual volume for second straight month.

·         Growing surplus in Q1 2025 contrasts with balanced supplies in Q1 2024, pointing to supply-overhang carried into Q2 2025.

·         Singapore’s base oils exports to southeast Asia fall in April 2025 before rebounding in recent weeks.

·         Recovery in shipments in recent weeks could point to blenders’ moves to replenish stocks.

·         Recovery in shipments could also point to improvement in demand.

·         Any extension of recovery in shipments, without improvement in demand, could trigger growing stock-build before seasonal slowdown in activity from end of second quarter of the year.

·         India’s imported Group II base oils price premium to FOB Asia cargo price holds firm, contrasting with slumping premium in May 2024.

·         Widening premium so far in Q2 2025 facilitates arbitrage, points to ongoing buying interest.

·         Any additional buying interest would coincide with mixed supply-demand fundamentals.

·         Any additional buying interest follows strong rise in India’s base oils imports in April 2025.

·         Higher imports in March-April 2025 help to replenish blenders’ depleted stocks.

·         India’s lube demand is typically lower in Q2 and Q3 compared with first quarter of the year.

·         Lower crude oil prices cut further the attraction of building larger stocks.

·         Any additional buying interest could reflect moves to lock in sufficient supplies before monsoon season.

·         Buying interest could also point to concern about impact of simultaneous plant maintenance work in India, Middle East and Asia during Q2 2025, especially for certain base oils grades.

·         Imminent completion of large portion of plant maintenance work could then ease those concerns and curb that buying interest.

·         Buying interest could also reflect sustained demand for very-light grade base oils.