Asia base oils demand outlook: Week of 29 July

·        Asia’s base oils demand faces contrasting signals that could prompt moves to delay stock replenishment plans.

·        Regional lube demand set for seasonal pick at end-Q3 2024 and start of Q4 2024.

·        Buyers would need to lock in supplies soon to cover seasonal pick-up in demand at end-Q3 2024.

·        Slower consumption of their existing stocks would curb urgency to lock in replenishment supplies.

·        Buyers’ stocks in some markets show signs of falling faster than others.

·        Lower crude oil prices and expectations of healthy availability of supply incentivize buyers to hold back in anticipation of base oils price adjustments to reflect those dynamics.

·        Rise in demand at end-Q3 2024 likely to coincide with scheduled plant maintenance work in South Korea.

·        Rise in demand could coincide with firm buying interest from Americas if that region faces supply disruptions over the coming weeks.

·        Rise in demand could coincide with pick-up in availability of supplies from Americas if that region avoids supply disruptions.

·        Asia’s Group II heavy-grade price premium to light grades extends rise to highest since end-2021.

·        Rising Group II heavy-grade premium to light grades, firm Group I heavy-grade premium to light-neutrals and firm heavy-grade premium to gasoil points to strong fundamentals for heavy grades.

·        China’s base oils demand would need to pick-up in Q3 2024 to absorb rise in supply at end-Q2 2024.

·        China’s domestic Group II price premium to FOB NE Asia cargo prices resumes steady rise that began at end-May 2024.

·        Premium continues to widen even after rise in China’s base oils supply in June 2024.

·        Rising premium suggests any pressure from surplus supply remains limited.

·        Rise in China’s June supply, more feasible arbitrage to China and limited downward price-pressure point to signs of firmer demand than previously.

·        China’s domestic Group II heavy-grade premium to light grades extends rise to highest in more than two years.

·        Widening premium points to even stronger fundamentals for Group II heavy grades.

·        Outlier is brightstock.

·        China’s domestic Group I brightstock premium to FOB Asia prices extends drop to lowest since Nov 2023, although it remains well above year-earlier levels.

·        Singapore’s base oils exports to China rebound in July 2024.

·        Rise in shipments and China's still-rising domestic price premium to FOB Asia prices adds to signs that surplus supply remains manageable for most grades.

·        Singapore’s base oils exports to southeast Asia hold relatively firm in June 2024, contrasting with fall in shipments to China and India.

·        Firm shipments point to steadier demand in southeast Asia compared with China and India.

·        Firm shipments highlight the reliance of key markets in southeast Asia on supplies from sources like Singapore.

·        Trend contrasts with China’s shrinking requirements for overseas supplies and the prospect of a similar scenario in India over the coming year.

·        India’s CFR Group II price premium to FOB NE Asia prices stays narrow.

·        Narrow premium points to still-muted demand, suggests buyers have sufficient stocks or expect prices to adjust lower and supply to remain readily available.

·        Muted demand curbs impact of slowdown in arbitrage shipments from US to India over coming months.

·        India’s imports in July 2024 shows signs of getting boost from pick-up in supplies from Singapore, Taiwan, and Saudi Arabia, as well as additional flows from Turkmenistan.

·        Imports from Saudi Arabia mostly reflect arrival of cargo in H1 July 2024 that loaded in June 2024.

·        Imports from Saudi Arabia could fall in Aug 2024, with no cargoes loaded from the country in July 2024 bound for India.