Asia base oils demand outlook: Week of 24 March

·         Asia’s base oils demand could hold steady even with high heavy-grade prices and seasonal slowdown in consumption at start of Q2 2025.

·         Asia’s lube demand likely to peak in month of March, before holding at lower levels over following months.

·         Lube demand in Q2 2025 likely to remain well above levels in Q1 2025 even with slowdown at start of Q2 2025.

·         Firm demand likely to sustain ongoing requirements for supplies.

·         Prospect of ongoing plant maintenance work in Q2 2025 could curb speed of pick-up in supplies.

·         Dynamic could leave fundamentals relatively balanced.

·         China’s base oils demand shows mixed signals.

·         China’s domestic Group II N500 price extends fall vs diesel and vs FOB Asia cargo price.

·         China’s domestic Group II N150 price by contrast rises vs diesel, steadies vs FOB Asia cargo price.

·         China’s domestic Group I brightstock premium to FOB Asia cargo price extends rebound.

·         Diverging price trends coincide with round of domestic plant maintenance in China and sustained rise in shipments from southeast Asia to China in Feb-March 2025.

·         Singapore’s base oils exports to China and southeast Asia remain at elevated levels over past four weeks.

·         Rise in shipments to China likely consists mostly of term cargoes.

·         Rise in shipments to China helps to cover for domestic plant maintenance work.

·         Rise in shipments to southeast Asia balances out any slowdown in flows from South Korea, and signs of slowdown in shipments from Taiwan to the region in March 2025.

·         Rise in shipments follows sustained pick-up in Asia exports to southeast Asia in Feb 2025.

·         Rise in exports to southeast Asia in Jan-Feb 2025 enables blenders to replenish stocks ahead of typical seasonal rise in demand in month of March.

·         India’s base oils demand could be more mixed.

·         Seasonal rise in lube demand in month of March likely to leave blenders with depleted stocks.

·         Prospect of seasonal slowdown in demand at start of Q2 2025 curbs urgency to replenish stocks.

·         Any slowdown could be short-lived, with buyers typically seeking to replenish stocks ahead of monsoon season that usually starts in month of June.

·         Plant maintenance in India, Asia, and US during Q2 2025 could curb availability of surplus volumes from those sources over coming weeks.

·         Premium of CFR India Group II prices over FOB Asia prices widens but remains at levels that complicate arbitrage.

·         Narrow premium points to still-cautious buying interest.

·         Widening premium could point to pick-up in that buying interest.

·         CFR India Group II light-grade premium to FOB Asia cargo price widens more than heavy-grade premium.

·         Still-low CFR Group II heavy-grade premium follows rise in India’s Group I/II heavy-grade imports to multi-year high in Feb 2025.

·         Group I base oils account for rising share of those supplies.

·         Trend adds to signs of increasingly high Group II prices relative to Group I incentivizing switch away from premium-grade base oils.

·         Signs of ready availability of Group I base oils facilitates such a switch.

·         Firmer CFR Group II very-light grade and light-grade premium to FOB Asia N150 cargo price follows dip in India’s very-light-grade base oils imports to eighteen-month low in Feb 2025.

·         Supplies could get boost in March-April 2025 amid rebound in shipments of very-light grades from markets like Qatar, pick-up in shipments from other sources in Middle East, and arrival of cargo from Spain.

·         Those supplies would follow rebound in South Korea’s base oils exports to India to six-month high in Feb 2025.

·         Likely arrival of shipments around H2 March/H1 April 2025 would coincide with seasonal slowdown in demand at start of India’s new financial year from start of April 2025.

·         Indian buyers’ low stocks and ongoing plant maintenance could support ongoing buying interest.

·         Pick-up in flows from various other sources could facilitate moves to replenish stocks, limiting extent of any upward price pressure.