Asia base oils demand outlook: Week of 21 Oct

·        Asia’s base oils demand likely to stay mixed, with firmer demand in India, steady requirements in southeast Asia, weaker demand in China.

·        Signs of slowdown in shipments to China, and the country’s weaker domestic prices vs FOB Asia prices, add to signs of more muted demand in that market.

·        India’s Group II prices stay firm relative to Asia prices, pointing to ongoing buying interest in that market.

·        Base oils exports to China from South Korea, Taiwan and Singapore combined fall in Sept 2024 to lowest in more than a decade.

·        China accounts for 8% of South Korea’s base oils exports in Sept 2024.

·        Share is lowest in almost two years, reflecting deeper slide in South Korea’s shipments to China than to other markets.

·        Slide in shipments to China adds to signs of slowdown in country’s base oils demand, especially for overseas supplies.

·        China’s domestic Group II price premium to FOB NE Asia price falls again, after rising from May 2024 to early Oct 2024.

·        Narrower premium complicates arbitrage, adding to signs of more muted demand from buyers in China.

·        China’s firm domestic Group II premium to diesel points to steadier demand, but with domestic supply sufficient to cover requirements.

·        Singapore’s base oils exports to China over last four weeks stay lower than usual compared with first seven months of 2024.

·        Slowdown in shipments adds additional signs of more muted demand in the country.

·        Philippines’ imports from Thailand exceed supplies from Singapore and South Korea combined in Aug 2024 for fourth time this year.

·        That happened just three times in 2022 and 2023 combined.

·        Rising share of supplies from Thailand points to growing demand for Group I base oils even as regional availability dwindles.

·        Dynamic contrasts with other countries in Asia, where premium-grade base oils account for growing market share, while Group I market share shrinks.

·        India’s base oils demand for overseas supplies likely to hold firm during Q4 2024 even after rebound in imports in Sept 2024.

·        Higher imports in Sept 2024 help to replenish blenders’ depleted stocks ahead of expected fall in shipments from South Korea during most of Q4 2024.

·        Surge in imports of very-light grade base oils contrasts with fall in shipments of other grades.

·        Dynamic muffles impact of rise in imports, curbs blenders’ ability to replenish stocks of other grades.

·        Stock-building likely to get even more complicated this and next month because of likely drop in imports.

·        South Korea’s base oils exports to India fall to fourteen-month low in Sept 2024, raising likelihood of drop in India’s total imports in Oct 2024.

·        Drop in shipments from South Korea puts onus on blenders to boost imports from other sources.

·        Key sources like Taiwan and Saudi Arabia likely had limited room to increase significantly their shipment volumes beyond recent levels.

·        Singapore’s base oils exports to India show signs of improving to more typical levels over month to mid-Oct 2024 but show little sign of larger-than-usual flows.

·        Any significant pick-up in arbitrage shipments from US shows little sign of materializing any time soon.

·        Dynamic could leave domestic demand outpacing supply.

·        CFR India Group II heavy-grade premium to FOB NE Asia prices extends rise in Oct 2024, recovering from discount to FOB prices in most of Q3 2024.

·        Discounted price cut incentive for overseas suppliers to move more heavy-grade shipments to India.

·        India’s Group II heavy-grade base oils imports duly fall in Sept 2024 to second-lowest level in fifteen months.

·        Recent recovery in CFR India heavy-grade price differential suggests the drop in supply may have been overdone and exceeded any slowdown in demand.

·        Heavy-grade imports likely to stay lower in Oct 2024 because of plant maintenance work in South Korea.

·        India’s imports of very-light grade base oils rise to 30-month high in Sept 2024.

·        Jump in imports follows rise in India’s retail diesel premium to CFR India N70 price in Sept 2024 to highest level in more than two years.

·        India’s demand for very-light grade base oils has tendency to rise when diesel premium to N70 widens.