Asia base oils demand outlook: Week of 21 July

·         Asia’s base oils demand shows signs of holding firmer than usual for time of year even as region’s lube demand faces seasonal slowdown in month of August.

·         Lower end-user consumption and prospect of improving availability of supply curbs need to build stocks.

·         Tighter-than-usual supply so far this year, lack of build-up of surplus volumes, and seasonal pick-up in demand in late-Q3 2025 could support steady demand.

·         Signs of ongoing requirements for additional supplies in markets like India provide refiners with convenient and regular outlets for surplus volumes.

·         Recent pressure on Group II heavy-grade prices could ease amid signs of more feasible arbitrage opportunities to markets like India and Middle East.

·         Narrowing Group II heavy-grade premium to Group I heavy-neutrals could also incentivize buyers to procure more Group II supplies instead.

·         China’s base oils demand shows signs of easing for both domestic and overseas supplies.

·         China’s Group II margins stay weak for light-grade supplies from domestic refiners, pointing to soft supply-demand fundamentals.

·         China’s Group II base oils price premium to FOB Asia cargo prices falls.

·         Lower premium includes domestic prices for imported supplies.

·         Volatility of base oils premium increases risk of lining up arbitrage shipments.

·         Fall in base oils price-premium suggests that any recent supply tightness has eased, even with domestic refiners still incentivized to trim run-rates.

·         South Korea’s base oils exports to China rise to four-month high in June 2025.

·         Any extension of rise in shipments into Q3 2025 would cushion impact of likely recovery in South Korea’s exports over coming months.

·         Any slowdown in China’s demand for overseas supplies could conversely force South Korea’s refiners to target other more distant markets to clear surplus volumes.

·         Signs of low stocks in southeast Asia could cushion impact of seasonal slowdown in lube consumption in coming weeks.

·         Asia’s base oils exports to southeast Asia lag demand in May 2025 by largest volume in more than a year.

·         Asia’s exports to southeast Asia show signs of barely covering southeast Asia demand in June 2025.

·         Dynamic leaves blenders with lower inventories at start of Q3 2025.  

·         Singapore’s base oils exports to southeast Asia rise in Q2 2025, outpace South Korea’s exports to southeast Asia by largest volume in more than five years.

·         Singapore’s rising shipments to southeast Asia, and rising share of regional market, leave island-state well-positioned ahead of expected rise in its production capacity in coming months.

·         Dynamic conversely could put more pressure on supplies from South Korea to target other outlets.

·         India’s base oils demand shows signs of holding firm.

·         India’s imported Group I SN 500 cargo price-premium to FOB Asia price holds at widest level in more than a year.

·         Wider price-premium facilitates arbitrage to move more supplies to India.

·         Wider price-premium follows slump in India’s imports of Group I heavy neutrals to eighteen-month low in June 2025.

·         Imports of Group I heavy neutrals fall mostly because of sharp dip in supplies from Middle East.

·         Dynamic reflects slowdown in shipments from Iran and importance of supplies from that source.

·         Any sustained slowdown in Group I heavy-neutrals from Iran has multiple repercussions besides drop in outright supply.

·         Slowdown cut India’s supply of heavy grades at competitive prices.

·         Slowdown complicates buyers' moves to use more Group I base oils as alternative to higher-priced Group II base oils.

·         Slowdown could in turn boost demand for Group II heavy grades.

·         Slowdown could incentivize buyers to hold larger stocks to cover for any such unexpected drop in supplies of other base oils grades.

·         India’s imported Group II heavy-grade cargo price-premium to FOB Asia cargo price widens further.

·         Cargo price-premium widens even with firm Group II import volumes in June 2025, and even amid ongoing wave of shipments from Asia to India.

·         South Korea’s base oils exports to India rise to ten-month high in June 2025.

·         Exports rise ahead of typical slowdown in demand during monsoon season.

·         Exports from Singapore to India stay higher than usual over past month even with slowdown in past week.

·         Ongoing buying interest in higher-than-usual volumes from Asia points to steady demand, concern about tight inventories.

·         Any signs of firmer-than-expected demand would put additional pressure on tight inventories.

·         Ongoing buying interest could also reflect concern about any further disruption to availability of supplies from Middle East.