Asia base oils demand outlook: Week of 26 Aug

·        Asia’s base oils demand could be more mixed even with prospect of seasonal pick-up in lube consumption in China and India at end-Q3.

·        Increasingly firm base oils values versus feedstock/competing fuel prices could incentivize buyers to trim procurement plans amid concern about divergence between margins and supply-demand fundamentals.

·        Demand in southeast Asia could be more muted amid signs of surge in shipments to the region at start of Q3 2024.

·        Rise in shipments likely replenishes blenders’ inventories, curbing urgency to seek additional volumes.

·        Southeast Asia remains key outlet for shipments from Singapore in recent weeks.

·        High volumes follow on from surge in shipments to southeast Asia in July 2024, adding to regional supplies.

·        Singapore’s share of Vietnam’s base oils imports extends its slide, dipping to around 30% of the total in July 2024.

·        Share falls from 42% of the total in Jan-July 2024 and from 47% in 2023.

·        South Korea’s share of Vietnam’s base oils imports rises to 48% in Jan-July 2024, after lagging Singapore in at least the last four years.

·        Vietnam is key base oils outlet for Singapore and South Korea as rising base oils production in China, and soon India, curb overseas base oils requirements in those markets.

·        Prospect of recovery in domestic base oils production in China likely to curb need for additional volumes from regional sources.

·        China’s domestic base oils demand shows signs of holding firmer in Q3 2024 than in Q3 2023.

·        China's domestic Group II base oils values hold firm vs diesel prices and vs FOB NE Asia cargo prices, especially for heavy grades, even as supply outpaces year-earlier levels in July 2024.

·        Firm prices point to more balanced supply-demand fundamentals compared with same time last year, even with higher supply vs that period.

·        More balanced fundamentals raise prospect of stronger pick-up in domestic demand in late-Q3 2024.

·        Impact on overseas supplies of any such pick-up in demand partly depends on size of any recovery in China’s domestic base oils output.

·        India’s base oils demand could get support from prospect of limited supply-build in first two months of Q3 2024.

·        Any pick-up in India’s demand likely to focus more on light grades than heavy grades, whose supplies surged in July 2024.

·        India’s CFR Group II N150 premium to FOB NE Asia price holds firm at highest since start of Q2 2024.

·        India’s CFR India Group II N500 price falls to discount to FOB NE Asia price for first time in more than two years.

·        Wider Group II N150 premium points to firmer demand for light-grade base oils, more muted buying interest in heavy grades.

·        Light-grade price dynamics follow drop in Group II/III light-grade and very-light-grade imports in July 2024 to four-month low.

·        Drop in imports cuts buyers’ stocks, adds to need for additional volumes to replenish supplies in preparation for seasonal pick-up in demand.  

·        Weaker heavy-grade price dynamics follow rebound in imports of Group II/III heavy-grade base oils in July 2024.

·        Rebound in imports replenishes buyers’ stocks, curbing urgency to seek additional volumes.