Asia base oils demand outlook: Week of 21 April

·         Asia’s base oils demand could face more marked pressure as expectations of softer supply-demand fundamentals coincide with concern about economic slowdown and impact of US tariffs.

·         Uncertainty about timing, size and impact of US tariffs adds to blenders’ incentive to maintain lower stocks.

·         High base oils prices relative to feedstock and gasoil prices and relative to other regions add to incentive to hold back.

·         High price differentials reflect tight supply and strong demand fundamentals in first few months of 2025.

·         Price differentials remain elevated even with signs of easing supply tightness of some grades.

·         China’s base oils demand for overseas supplies could get support during round of plant maintenance in the country.

·         Likely seasonal slowdown in lube demand later in Q2 2025 could be sharper than usual as China-US trade tariffs dampen economic activity.

·         Slowdown in demand and completion of plant maintenance work could trigger steeper fall in requirements for overseas supplies.

·         China’s domestic Group I brightstock, Group II light grades, and Group III base oils prices weaken relative to FOB Asia prices.

·         Weakening price differentials complicate arbitrage.

·         Simultaneous price-weakness of growing number of products could point to more widespread slowdown.   

·         Base oils demand in southeast Asia shows signs of slowing even ahead of this month’s US tariff announcements and fall in crude oil prices.

·         South Korea’s base oils exports to southeast Asia stay lower than usual in March 2025, contrasting with surge in shipments to India.

·         Lower exports coincides with sharp slowdown in shipments from Singapore to southeast Asia in recent weeks.

·         Shipment volumes ease even with blenders likely facing low inventories after seasonal rise in demand in month of March.

·         Slowdown in shipments points to less urgency among blenders in southeast Asia to replenish lower stocks.

·         Lower crude oil prices and concern about slower regional economic growth could now add to blenders’ preference to maintain lower stocks.

·         Singapore’s steadier base oils exports to India and China over past four weeks coincide with plant-maintenance work in both countries.

·         India’s demand for Group II base oils could be more muted in Q2 2025 as firm import volumes in March 2025 cushion impact of strong lube demand that month.

·         India’s Group II base oils imports hold relatively firm in March 2025 even as they slip from previous two months.

·         Relatively firm imports point to limited impact from Group II plant maintenance work in South Korea.

·         Imports likely to hold firm in April 2025 after South Korea’s base oils exports to India rise to seven-month in March 2025.

·         Any rise in flows from South Korea would likely coincide with arrival of arbitrage shipments from US, and signs of pick-up in flows from Saudi Arabia.

·         Rise in imports in March-April 2025 could leave blenders with healthy inventories.

·         Higher stocks would coincide with recent dip in crude and diesel prices in April 2025.

·         Higher stocks and lower crude oil prices could complicate blenders’ subsequent procurement plans amid concern about impacting value of existing inventories.

·         CFR India Group II heavy-grade premium to FOB Asia cargo price holds at firmer levels in April 2025.

·         CFR Group II premium holds firmer even with high imports of heavy-grade base oils in March 2025, including of Group II supplies.

·         Dynamic points to unusually firm demand for heavy-grade base oils.

·         CFR Group II premium extends rise even as Group II heavy grades account for dwindling share of India’s heavy-grade base oils imports in March 2025.

·         Dwindling share suggests buyers are seeking to use more Group I supplies in place of Group II base oils.

·         Unusually wide gap between CFR India Group I and Group II heavy-grade base oils incentivizes such a move.

·         That price dynamic starts to reverse in H2 Apr 2025.

·         Reversal could continue over coming weeks amid prospect of tighter Group I heavy-grade supplies and improving availability of Group II heavy grades.

·         India’s demand for very-light-grade base oils could get support as lower crude oil prices widen their discount to domestic retail diesel prices.

·         India’s CFR N70 price discount to domestic retail diesel prices tends to follow similar trend to crude oil discount to retail diesel prices.

·         Wider retail diesel premium to CFR N70 prices often coincides with firmer demand for very-light grade base oils.  

·         Pakistan’s base oils supply holds firm in three months to Feb 2025, pointing to sustained pick-up in demand.

·         Pakistan’s Group II heavy-grade base oils imports rise more than 50% in Feb 2025 from previous month, lagging the more-than-100% rise in country’s total imports.

·         Group II heavy grades as share of Pakistan’s total imports duly slump in response.

·         Smaller rise in Group II heavy-grade imports could point to rising consumption boosting demand for other grades more than Group II heavy grades.

·         Smaller rise in Group II heavy-grade imports could reflect tight availability of the product in Asia.

·         Tighter availability in Asia contrasts with signs of persistently-healthy availability of heavy grades in US.

·         US’ share of Pakistan’s Group II heavy-imports rises in Feb 2025, reflecting that dynamic.