Asia base oils demand outlook: Week of 25 Nov

·        Asia’s base oils demand likely to soften as seasonal slowdown in demand, signs of improving supply and relatively firm prices incentivize buyers to hold back.

·        China’s demand for overseas base oils supplies could get boost because of plant maintenance work and recent plant closure.

·        Signs of healthy availability of supply and weak prices suggest any such boost will be limited.

·        China’s domestic price premium for imported Group II base oils steadies after sliding in Nov 2024 to lowest in more than five months.

·        Lower premium complicates arbitrage, suggests domestic supply is sufficient to meet demand even with plant shutdowns.

·        China’s base oils supply rises to seven-month high in Oct 2024 ahead of shutdowns.

·        Rise in supply ahead of seasonal slowdown in demand likely adds to buyers’ stocks, curbing need to line up additional supplies.

·        China’s domestic Group II heavy-grade price premium to light grades widens further to multi-year high.

·        China’s domestic Group II heavy-grade premium to FOB NE Asia prices extends recovery after dipping in Oct 2024.

·        Firmer Group II N500 premium points to stronger supply-demand fundamentals in China for Group II heavy grades.

·        But higher premium remains at level that makes arbitrage hard to work.

·        Plant shutdowns in China coincide with signs of pick-up in shipments from Singapore to the country in recent weeks.

·        Rise in shipments to China contrasts with lower volumes to India and southeast Asia.

·        Base oils demand in southeast Asia likely to stay more muted over coming weeks as recovery in supply provides buyers with leverage to secure volumes as and when required.

·        Prospect of slowdown in lube demand over coming months adds to attraction to maintain lower stocks.

·        Singapore’s bunker fuel sales per vessel extend rise in Oct 2024 for eleventh month from year-earlier levels.

·        Rising bunker fuel sales likely boost Singapore’s marine lube consumption, supporting firm demand for base oils required to produce those lubricants.

·        Dynamic likely to sustain firm requirements for heavy grades like Group I brightstock.

·        Singapore’s rising bunker fuel sales in Oct 2024 contrast with drop in Fujairah’s bunker fuel sales for fifth time in six months.

·        Trend points to increasingly firm marine lube and base oils demand in Singapore compared with Fujairah.

·        India’s demand for arbitrage shipments from markets like US could ease as buyers tap improving supply in Asia.

·        Buyers could alternatively push for even more competitive prices for arbitrage shipments from US.

·        South Korea’s base oils exports to India and UAE combined rebound in Oct 2024 after slumping in Sept 2024.

·        Exports likely to hold firmer in Nov 2024 following completion of plant maintenance work in South Korea at end-Oct 2024.

·        Recovery in shipments from South Korea curbs urgency for buyers to seek supplies from US instead.

·        Dynamic curbs impact of tighter-than-expected supply from US so far in Q4 2024.

·        Dynamic gives buyers more price leverage over any supplies that are available from US at year-end and early next year.

·        India’s demand for Group II heavy grades could face pressure from signs of healthy availability of alternative supplies at competitive prices.

·        India’s Group II heavy grades account for little more than 50% of country’s total heavy-grade imports in Oct 2024.

·        Share falls from already-low level of less than 60% in Sept 2024 to three-year low.

·        Expected recovery in availability of Group II heavy grades should boost their share of India’s heavy-grade imports in coming months.

·        Group II heavy-grade share could also revive more slowly if alternative supplies cover buyers’ requirements, adding to attraction of their steep discount to Group II base oils.  

·        CFR India Group I brightstock premium to FOB Asia price falls in past week to two-month low.

·        Sharp fall in premium points to change in supply-demand fundamentals, or to likely adjustment in price premium to reflect the same supply-demand fundamentals as in recent weeks.