Asia base oils demand outlook: Week of 7 April

·         Asia’s base oils demand could fall in face of slumping crude oil prices and concern about slower-than-expected economic growth in the region.

·         Concern about weaker demand cuts fundamentals-related support that could cushion against impact of falling crude oil prices.

·         Concern about more muted demand and expected improvement in base oils supply in coming weeks would contrast with increasingly high base oils margins caused by lower crude oil prices.

·         Concern about growing divergence between market fundamentals and base oils margins raises expectations of subsequent price adjustments.

·         Concern about demand and price volatility incentivize buyers to hold back and maintain lower stocks.

·         Market volatility and uncertainty could prompt buyers to rely on and minimize term volumes until clarity improves over impact of recent market developments.

·         Any signs of more protracted slowdown in Asia’s economic growth relative to other regions could trigger pick-up in buying interest in those other regions for supplies from Asia.

·         China’s base oils demand could turn even more cautious, with any additional buying interest mostly to cover for ongoing round of domestic plant maintenance.

·         China’s domestic base oils price turn increasingly mixed versus FOB Asia cargo prices.

·         China’s domestic Group II N500 premium weakens versus FOB Asia prices, domestic N150 premium rises, and Group I brightstock premium holds firm.

·         Narrowing Group II N500 premium points to more muted interest in securing additional supplies even with ongoing domestic plant maintenance work.

·         Singapore base oils exports to China hold firm over last four weeks even as its total exports fall.

·         Firm export volumes to China could reflect demand for supplies to cover for lower domestic production during round of plant maintenance work.

·         Singapore’s base oils exports to southeast Asia fall back to more typical levels over last four weeks.

·         Slowdown in shipments coincides with signs of fall in exports from Taiwan to southeast Asia in March 2025, as well as ongoing plant maintenance in South Korea.

·         Slowdown in shipments follows seasonal rise in regional demand in March 2025, leaving blenders with depleted stocks.

·         Slowdown in shipments could reflect blenders’ preference to replenish stocks more slowly.

·         Imposition of US tariffs on imports from Asia could add to blenders’ preference to maintain lower stocks.

·         Any such slowdown in buying interest could slow or reverse signs of firmer lube consumption in southeast Asia in recent months.

·         Thailand’s lube demand rises in Feb 2025 for third month, reflecting that trend.

·         Strong overseas demand for Thailand’s base oils supplies lifts country’s total demand close to six-month high in Feb 2025.

·         Concern about economic slowdown could trigger reversal of recent recovery in lube demand in markets like Thailand.

·         Overseas demand for Thailand’s base oils could get ongoing support amid tighter availability from other key sources like Japan.

·         Demand could get further boost ahead of overlapping plant maintenance in Japan and Thailand in coming months.

·         Concern about economic slowdown throughout Asia could instead overshadow structurally tighter supply and curb overseas demand.

·         Japan’s base oils/lube demand falls in Jan-Feb 2025 even before imposition of US tariffs.

·         Weaker demand cushions impact of country’s lower base oils output.

·         Weaker demand mirrors slowdown in consumption in South Korea in first two months of 2025, as well as slower demand in China.

·         Weaker demand in northeast Asia coincides with growing concern about US tariffs and their impact on Asia’s economic growth even before their implementation.

·         Any extension of demand weakness could cushion impact of Asia’s tighter supply because of widespread round of plant maintenance.

·         India’s base oils demand could dip as buyers hold back until crude prices stabilize.

·         Buyers could then target more competitive prices that compensate for market volatility and uncertainty about demand outlook.

·         Any pick-up in surplus supply because of weaker demand would add to buyers’ leverage.

·         CFR India Group II N500 price strengthens vs FOB Asia, vs FOB US Gulf coast and vs CFR NE Asia prices in early-April 2025.

 ·         Outperformance of CFR India N500 price points to sustained buying interest in the heavy-grade product.