Asia base oils demand outlook: Week of 4 Nov

·        Asia’s base oils demand likely to stay mixed, with steady buying interest in southeast Asia and India and more muted demand from China for overseas supplies.

·        Crude price volatility, expectations of easing supply-tightness, and seasonal slowdown in lube consumption likely to incentivize buyers to maintain sufficient stocks to cover immediate requirements.

·        China’s base oils demand for domestic supplies shows signs of being strong enough to absorb most of the country’s rising output of premium-grade base oils.

·        China’s domestic Group II base oils price premium to diesel prices holds in relatively narrow range since start of 2024, pointing to steady supply-demand fundamentals.

·        Dynamic adds to signs that domestic supply is likely to expand its share of country’s requirements at expense of imported supplies.

·        China’s demand for overseas supplies could focus more on Group I base oils as domestic output covers growing share of country’s premium-grade requirements.

·        China’s Group II price premium to FOB NE Asia prices for imported domestic supplies falls to lowest in more than three months.

·        Sliding price premium boosts attraction for supplies from Taiwan to target other markets rather than China.  

·        Singapore’s base oils exports show signs of holding steady to southeast Asia, China and India in Oct 2024 vs previous month.

·        Steady exports would curb opportunity for buyers in southeast Asia to procure additional supplies to replenish stocks.

·        Steady exports would curb opportunity for buyers in India to secure additional volumes to compensate for expected drop in shipments from South Korea.

·        Japan’s base oils exports to southeast Asia fall in Sept 2024 to second lowest in more than a decade, compounding drop in shipments to the region.

·        Fall in Japan’s base oils exports to southeast Asia likely to have largest impact on Group I supplies.

·        Drop in Group I shipments boosts importance of supplies from other key sources such as Thailand.

·        Southeast Asia’s focus on Thailand for Group I supplies shows signs of cutting availability from the country for other regions. 

·        Drop in Asia’s base oils exports to southeast Asia in Aug-Sept 2024 should support steadier requirements in Q4 2024 as buyers seek to replenish low stocks.

·        Japan’s base oils/lube demand sees seasonal pick-up in Sept 2024 from previous month but falls for third time in four months from year-earlier levels.

·        Weaker demand mirrors similar slowdown in South Korea, raises prospect of deepening seasonal dip in consumption in northeast Asia in Q4 2024.

·        Weaker demand in northeast Asia would partially cushion impact of tighter supply in Asia at start of Q4 2024.

·        India’s demand for overseas base oils supplies likely to hold firm over coming weeks.

·        CFR India Group II light/heavy-grade price premium to FOB NE Asia prices stays wider, pointing to still-firm buying interest.

·        India’s lower domestic base oils output in Sept 2024 complicates blenders’ moves to replenish stocks ahead of seasonal pick-up in demand in Q4 2024.

·        India’s base oils supply almost matches demand in Sept 2024 on back of rebound in imports.

·        Supply still lags demand for seventh month in Sept 2024 amid unexpected drop in domestic output.

·        Supply-demand balance likely to remain tight until South Korea’s base oils exports return to normal, and/or domestic demand eases.

·        CFR India N70 premium to Singapore gasoil surges in two months to early-Sept 2024, ahead of start of plant maintenance work in South Korea in Sept 2024.

·        CFR India N70 premium slides since early-Sept 2024, stays lower in early Nov 2024.

·        Lower premium precedes expected completion of plant maintenance work in South Korea by end-Oct 2024.

·        Lower premium could point to expectations of improvement in Group II base oils supplies over coming weeks, easing recent tightness.