Asia base oils demand outlook: Week of 28 Oct

·        Asia’s base oils demand could be more muted in coming days as market awaits sellers’ response to lower crude oil prices.

·        Demand could get support from signs of firmer requirements in southeast Asia and India, countering signs of more muted buying interest from China.

·        China’s demand for overseas base oils supplies could stay lower as buyers cover more of their requirements with supplies from domestic refiners.

·        China’s base oils imports fall in Sept 2024 from month of August for first time in at least eight years.

·        Unusual drop in imports in month of September coincides with rebound in China’s Group II base oils output that month.

·        Even with rise in domestic output, supply and demand shows signs of steadying in a relatively narrow range.

·        Steady demand raises prospect of stronger pick-up in requirements for overseas supplies only when domestic production capacity is lower because of factors like plant shutdowns.

·        China’s base oils exports rise to five-month high in Sept 2024, suggesting domestic output already exceeds buyers’ requirements.

·        China’s domestic Group II price premium to FOB NE Asia prices narrows further, especially for heavy grades.

·        Narrower premium adds to signs of more muted demand from China.

·        Base oils demand in southeast Asia could hold firmer as dip in shipments to the region in Aug-Sep 2024 coincides with seasonal pick-up in demand at end-Q3 2024.

·        Exports to southeast Asia from key Asia-Pacific suppliers fall in Sept 2024 to seven-month low, after already slowing in Aug 2024.

·        Lower supply and firmer demand likely left blenders with lower inventories at end-Q3 2024.

·        Dynamic raises prospect of pick-up in stock-replenishment at start of Q4 2024.

·        Recent market volatility incentivizes blenders to maintain lower stocks and procure smaller volumes more frequently.

·        Dynamic raises prospect of more frequent procurement of smaller volumes throughout Q4 2024.

·        Exports from Singapore to southeast Asia show signs of staying lower in Oct 2024.

·        Any further drop in Asia’s shipments to southeast Asia would add to squeeze on blenders’ stocks.

·        Singapore’s bunker fuel sales per vessel rises for tenth month in Sept 2024 and at fastest pace in four months.

·        Singapore’s rising bunker fuel sales, and rising bunker fuel sales per vessel, point to higher marine lubricants requirements.

·        Higher marine lube requirements likely support strong demand for Group I brightstock as key feedstock to produce the lubricants.

·        Vietnam’s base oils imports hold firm in Sept 2024, with South Korea and Singapore accounting for more than 90% of the country’s shipments.

·        Vietnam’s reliance on imports for all of its base oils supplies makes country increasingly valuable as key outlet for supplies from South Korea and Singapore.

·        South Korea remains Vietnam’s largest supplier in first nine months of 2024, displacing Singapore for first time in at least four years.

·        Any extension of that trend in 2025 could be problematic for Singapore, where new production capacity is set to start operations during the year.  

·        India’s base oils demand could get support from firm consumption and tighter supplies from overseas markets.

·        CFR India Group II N500 base oils price premium to FOB NE Asia prices extends recovery; N150 premium stays high.

·        Firm/rising premium points to still-firm demand for additional supplies, especially for heavy grades and especially compared with other markets like China.

·        Expected slowdown in India’s base oils imports from South Korea in Oct-Nov 2024 likely to support firmer demand for supplies from other sources.

·        Drop in supplies from South Korea coincides with seasonal rise in India’s lube demand in Q4 2024, compounding impact of lower volumes.

·        Singapore’s base oils exports to India improve in Sept 2024, show signs of staying at similar levels in Oct 2024.

·        Rise in shipments remains small and insufficient to balance out drop in flows from South Korea.

·        Muted rise in shipments from Singapore boosts importance of pick-up in supplies from other sources like Taiwan and Saudi Arabia.

·        Shipments from those markets to India show signs of holding relatively firm in Oct 2024 rather than climbing to much higher levels.

·        India sees pick-up in imports from US in Oct 2024, with more supplies set to arrive in Nov 2024.

·        But a larger rise in surplus US shipments to India has yet to materialize.