Asia base oils demand outlook: Week of 23 Sept

·        Asia’s base oils demand could be more muted amid signs key regional buyers have secured sufficient volumes for now to cover seasonal pick-up in consumption.

·        Volatile crude oil prices and high base oils margins incentivize buyers to maintain lower inventories.

·        Signs of firm lube consumption in southeast Asia and India likely to require more frequent moves to replenish those inventories.

·        China’s base oils demand could be more muted, with buyers likely to have already secured supplies to cover seasonal rise in consumption at end-Q3/early Q4 2024.

·        Buyers likely to be wary of building larger stocks ahead of seasonal slowdown in demand during final months of Q4 2024 and early weeks of 2025.

·        Prospect of slowdown in demand contrasts with rise in China’s Group I/II light/heavy-neutrals prices relative to Shandong diesel prices and relative to FOB Asia prices.

·        Price-strength points to tight supply relative to demand, incentivizes domestic refiners to raise output and buyers to boost imports.

·        China’s Group I light/heavy-neutrals price-strength precedes closure of Group I plant in the country in Oct 2024.

·        China’s Group I price-strength fails to extend to brightstock, whose premium to FOB Asia prices extends sustained slide.

·        South Korea’s base oils exports to southeast Asia fall in Aug 2024 to lowest level this year, even as country's total exports surge.

·        Drop in exports in Aug 2024 follows surge in shipments from Asia-Pacific refiners to southeast Asia in July 2024.

·        Drop in exports in Aug 2024 could point to structural slowdown in demand in southeast Asia.

·        Drop in exports in Aug 2024 more likely suggests surge in shipments in July 2024 replenished blenders’ stocks, curbing immediate requirements for additional volumes.

·        Singapore’s bunker fuel sales per vessel stay higher than usual in Aug 2024, rise for ninth month from year-earlier levels.

·        Strong bunker fuel consumption per vessel likely supports similar rise in marine lube requirements, and demand for Group I brightstock to produce the lubricants.

·        Singapore’s base oils exports to India extend rise in four weeks to mid-Sept 2024; shipments to China and southeast Asia also rise.

·        Rise in shipments to India adds to signs of pick-up in country’s base oils imports in Sept 2024.

·        South Korea’s base oils exports to India rebound in Aug 2024.

·        Rise in shipments raises prospect of boosting India’s imports in Sept 2024.

·        Rise in imports from South Korea would coincide with signs of pick-up in shipments from Saudi Arabia to India in recent weeks.

·        Prospect of pick-up in imports in Sept 2024 coincides with pause in recovery of India’s CFR Group II N150 premium to FOB NE Asia price over past month.

·        Prospect of pick-up in imports, and pause in price-recovery, suggest buyers are now more comfortable with inventory levels.  

·        India’s imports of Group II heavy grades extend sustained rise in Aug 2024, contrasting with slowdown in shipments of light grades.

·        Rising Group II heavy-grade imports and dip in Group I heavy-neutrals shipments point to rise in consumption of Group II base oils in place of Group I.

·        Even with that pick-up in consumption, India’s imports of Group I/II heavy neutrals surge this year.

·        Surge in imports of heavy neutrals raises prospect of supply outpacing demand.

·        India’s CFR Group II N500 price stays unusually weak relative to FOB NE Asia prices since June 2024, reflecting such a dynamic.

·        India’s demand for Group II light grades could face further pressure if imports of Group III base oils stay high.

·        Healthy availability and competitive prices for some Group III supplies provide buyers with attraction alternative in place of Group II light grades.

·        India’s Group III 4cSt base oils imports account for unusually large share of country’s Group II/III light-grade imports in Aug 2024, reflecting signs of such moves to use more 4cSt supplies instead.

·        CFR India Group I brightstock premium to FOB Asia price extends surge to highest since early-2023.

·        India’s rising brightstock premium contrasts with sliding premium of China’s domestic brightstock price vs FOB Asia price.