Asia base oils demand outlook: Week of 4 August

·         Asia’s base oils demand could get support from moves to lock in supplies to meet seasonal pick-up in demand during final weeks of Q3 2025.

·         Demand could have already got steady underlying support in recent weeks because of tighter-than-expected supply-demand fundamentals at start of Q3 2025.

·         Persistently tighter fundamentals could prompt buyers to maintain higher stocks until they are confident about any sustained improvement in supply.

·         Improving visibility over economic outlook could provide further support.

·         Those various dynamics could be supporting steady-to-firm base oils demand in southeast Asia.

·         Singapore’s base oils exports to southeast Asia hold firm in four-weeks to end-July 2025 even as they slip from June 2025.

·         Firm exports contrast with sharper fall in Singapore’s base oils exports to China and India.

·         Firm exports to southeast Asia in July 2025 follow pick-up in Vietnam’s base oils/lube imports in June 2025.

·         Pick-up in shipments mirrors growing number of other markets showing improving demand at end-Q2 2025.

·         Japan’s base oils demand rises in June 2025 for first time in four months from year-earlier levels to eleven-month high.

·         Stronger domestic consumption accounts for close to 90% of Japan’s total supply in June 2025.

·         Domestic demand’s higher-than-usual share of supply slashes volumes available for export.

·         Japan’s exports to southeast Asia duly slump in June 2025 to seven-month low.

·         Drop in Japan’s exports in June 2025 precedes Group I plant-maintenance work in Thailand in July 2025, leaving buyers targeting shrinking number of sources of Group I base oils.

·         Asia’s Group I base oils prices outperform Group II prices in recent weeks, reflecting their firmer fundamentals.

·         South Korea’s base oils demand also rises in June 2025 from year-earlier levels, climbing at fastest pace in almost two years.

·         South Korea’s base oils demand also rises in month of June from previous month for first time in four years.

·         Unusual rise in demand in month of June from May could reflect buyers’ moves to replenish lower-than-usual stocks.

·         Lower-than-usual stocks could reflect combination of tighter-than-usual domestic supply and concern about outlook for economy and industrial production.

·         Any extension of similar factors affecting stocks and consumption in other markets could support firmer-than-expected regional demand in early-Q3 2025.

·         China’s base oils demand shows signs of staying weaker, with scant moves to start replenishing stocks before seasonal pick-up in activity at end-Q3 2025.

·         China’s weak domestic Group II base oils margins incentivize domestic refiners to trim output.

·         China’s domestic Group II base oils price-premium to FOB Asia cargo prices narrows further.

·         Narrower premium also incentivizes overseas refiners to trim shipments to China.

·         Singapore’s base oils imports from China extend surge in recent weeks, after slowdown in flows during seven months to May 2025.

·         Pick-up in shipments adds to signs of rising surplus volumes in China, even with lower supply.

·         Dynamic points either to increasingly slack demand in China, or to prospect of strong pick-up in its requirements over shorter period in a few weeks’ time.

·         India’s imported Group II heavy-grade price-premium to FOB Asia cargo price extends fall for second week.

·         Even with drop in premium, heavy-grade differential stays firm and well above year-earlier levels.

·         India’s Group II heavy-grade price also maintains steep premium to US export prices.

·         Price-strength points to ongoing buying interest in Group II heavy grades.

·         Recent drop in Group II heavy-grade price differential could reflect weaker demand because of concern about exposure to lower prices, rather than just outright drop in demand.

·         Recent strength of CFR India Group I heavy-grade price-premium to FOB Asia cargo price adds to signs of still-firm demand for heavy-grade supplies.

·         Mixed price signals for Group II heavy grades extends to ex-tank Singapore market.

·         Premium of ex-tank Singapore Group II heavy-grade price to FOB Asia cargo price holds close to highest since early-2024 after surging over last two months.

·         Widening ex-tank premium partly reflects weakness of FOB Asia cargo price.

·         Any extension of that cargo-price weakness to markets in southeast Asia or to smaller-volume shipments would typically also put pressure on ex-tank price.