Asia base oils demand outlook: Week of 5 May

·         Asia’s base oils demand likely to face more downward pressure as slowing industrial activity in key regional markets start to reflect impact of US tariffs.

·         Demand already slowed amid uncertainty about impact of tariffs.

·         Slowdown in demand highlights widespread repercussion of tariffs, even for products that are not directly impacted.

·         Slowdown in demand could exacerbate typical seasonal dip in base oils consumption from end-Q2.

·         Concern about weaker demand coincides with still-high base oils margins that reflect tight supply-demand fundamentals.

·         Crude oil prices extend slide, magnifying their disconnect with base oils prices and further boosting base oils margins.

·         Concern about disconnect between base oils fundamentals and prices could add to buyers’ preference to maintain low stocks.

·         China’s base oils demand could see earlier-than-usual slowdown in second quarter as economic activity slows.

·         Concern about slowdown incentivizes blenders to maintain low stocks and procure smaller volumes from domestic sources.

·         Expected restart of several base oils units in China in May 2025 would boost domestic supply, facilitating those moves.

·         Rising domestic supply and weaker demand likely to cut requirements for shipments from overseas markets.

·         China’s domestic price premium to FOB Asia cargo prices stay narrow or weakens for most grades except Group II N150.

·         Rising Group II N150 premium boosts feasibility of arbitrage shipments.

·         Dynamic points either to firmer demand or prospect of adjustment in domestic N150 premium to deter shipment of additional supplies from regional markets.

·         Singapore’s base oils exports to China in last four weeks extend steady slide to lowest level since H1 Feb 2025.

·         Rise in shipments in intervening months coincides with plant maintenance and seasonal rise in demand in China.

·         More recent slowdown in shipments could reflect removal of those factors that supported firmer demand.

·         Singapore’s base oils exports to southeast Asia improve in H2 April 2025, although total shipments over last four weeks stay lower than usual.

·         Lower export volumes could point to buyers' more muted moves to replenish stocks after peak-demand period at end-Q1 2025.

·         Lower shipment volumes follow firm export volumes from refiners in Asia to southeast Asia in Q1 2025.

·         Steady export volumes in Q1 2025 mirror and help to cover for firm lube consumption in southeast Asia in Jan-Feb 2025.

·         Any more widespread signs of slowdown in export volumes in Q2 2025 could point to sharper-than-usual drop in demand.

·         Sharp fall in Japan’s base oils/lube demand in March 2025 supports prospect of such a scenario.

·         Japan’s base oils/lube demand falls sharply in March 2025 from year earlier for second straight month.

·         Lower demand mirrors drop in Japan’s industrial production in March 2025 amid sharp slowdown in motor vehicle production.

·         Slowdown highlights indirect impact of US tariffs on Japan’s base oils demand.

·         Lower domestic demand cuts its share of Japan’s output to nineteen-month low in March 2025.

·         Lower share of output frees up more of Japan’s supplies for export market.

·         India’s base oils demand shows mixed signals.

·         Signs of high import volumes in April 2025 likely boost blenders’ depleted stocks.

·         Higher inventories curb pressure to seek additional volumes.

·         Lack of large surplus volumes in overseas markets curbs availability of supplies at unusually competitive prices.

·         Lack of availability of such volumes at competitive prices curbs attraction for buyers to seek additional supplies and build stocks.

·         Firm prices and expectations of improving availability of supply in coming weeks add to attraction of holding back.

·         But CFR India Group II N500 price premium to FOB Asia cargo price extends rise to highest in more than a year.

·         Rising Group II heavy-grade premium to FOB Asia cargo price contrasts with sliding premium the same time a year ago.

·         Rising Group II heavy-grade premium facilitates arbitrage, points to ongoing buying interest.

·         Demand for Group II heavy grades could get support from tighter availability of Group I heavy neutrals because of plant maintenance in Middle East.

·         Steep premium of Group II heavy grades over Group I prices could limit any such pick-up in demand.

·         Demand could hold firmer for very-light grade base oils, whose discount to India’s retail diesel price remains unusually wide.

·         Wide light-grade price discount to diesel price often supports firmer buying interest for light grades.