Asia base oils demand outlook: Week of 2 Sept

·        Asia’s base oils demand likely to get support from seasonal rise in lube demand, signs of more limited supply surplus.

·        Unusually firm base oils margins for time of year could incentivize buyers to maintain lower stocks to limit exposure to any price adjustment.

·        Signs of limited supply-surplus and ongoing/upcoming plant shutdowns could curb such concerns, prompting buyers to build sufficient stocks to cover for seasonal pick-up in demand.

·        Group II heavy-grade prices stay unusually firm vs light grades in Asia and China markets.

·        Sustained strength of Group II heavy neutrals points to increasingly firm demand fundamentals for the grade.

·        China’s base oils prices hold unusually firm vs domestic diesel prices for the time of year, pointing to more balanced supply-demand fundamentals, especially vs year-earlier levels.

·        China’s base oils demand for overseas supplies could get support as widening gap between Group II domestic prices and FOB Asia prices makes arbitrage more feasible.

·        China’s demand for Group I base oils from regional sources could get a boost in the coming months amid prospect of permanent closure of a key Group I base oils unit in the country.

·        Singapore’s base oils exports to southeast Asia stay high in four weeks to end-Aug 2024, contrasting with slowdown in shipments to India and China.

·        Exports to southeast Asia stay high even after surge in Asia-Pacific shipments to the region in July 2024.

·        Still-high shipments to the region point either to firm demand compared with India and China, or to rise in stocks.

·        Singapore’s average bunker fuel sales per vessel rises in July 2024 for eighth straight month year on year.

·        Higher-than-usual bunker fuel sales and sales per vessel point to higher-than-usual marine lube consumption.

·        Higher-than-usual marine lube demand points to higher-than-usual consumption of Group I brightstock, a key component of marine lubricants.

·        Japan’s base oils/lube demand rises in July 2024 for third time in four months from year-earlier levels.

·        Signs of firmer consumption in northeast Asia in July 2024 cushion impact of higher supply, slowing build-up of surplus volumes.

·        India’s base oils demand outpaces supply in July 2024 for fifth month and by largest volume in more than four years.

·        Persistent supply-shortfall likely cut blenders’ stocks, curbing impact of seasonal slowdown in lube consumption in month of August.

·        Supply-shortfall likely to support firm demand for replenishment supplies, especially of light grades.

·        Recovery in CFR India Group II light-grade base oil premium to FOB NE Asia prices points to such a dynamic.

·        India light-grade premium to FOB NE Asia prices holds at highest since April 2024.

·        Closed arbitrage from US to India and ongoing/upcoming plant maintenance in Asia could add to buying interest for replenishment supplies.

·        Plant maintenance in Asia could support stronger buying interest in supplies from Saudi Arabia.

·        Demand for heavy grades could be lower after surge in India’s imports of the product in July 2024 replenished blenders’ stocks, curbing urgency to seek additional volumes.

·        CFR India Group II heavy-grade price stays at unusual discount to FOB NE Asia prices for second week, pointing to weaker demand fundamentals.