· Asia’s base oils supply faces prospect of rising following expected completion of plant maintenance, addition of arbitrage shipments and weaker demand.· US Group II export prices flip to discount to cfr India prices, boosting feasibility of more arbitrage shipments to that market.· More competitive US export prices complicate feasibility of moving more Asia shipments to Latin America.· China’s domestic Group II light-grade prices remain weak versus fob Asia prices, complicating arbitrage flows to China.· Cargo of Group II base oils set to load from Taiwan in coming days.· Shipment coincides with expected restart of Group II base oils unit in 1H Dec 2023.· Supplies from Japan show signs of falling sharply, while flows from Europe to southeast Asia pause over past month.· Trend likely to support firmer Group I prices relative to other grades..· China’s November base oils output rises to twenty-month high on higher Group I/Group II production..· China’s higher base oils output covers more of the country’s domestic requirements, curbing attraction/need for more supplies from overseas markets.· Domestic buyers’ preference to maintain low stocks adds to attraction of procuring supplies from domestic refiners.· Trend suggests that China’s demand for overseas base oils supplies is likely to stay muted even if demand improves over the coming months..· Japan’s October base oils exports fall to two-year low following closure of second base oils plant..· Exports fall more steeply than Japan’s base oils production and demand in Oct 2023.· Trend points to sufficient supply to cover domestic requirements, with exports bearing the main impact of the plant closure.· Slump in exports to Singapore and South Korea raises prospect of those markets seeking alternative supplies of Group I base oils.· Tight regional availability of Group I base oils incentivizes those markets to instead move to replace Group I base oils with premium-grade base oils where possible.· Even that move would require large volumes of additional supplies from other sources..· Thailand’s October base oils supply stays low amid lower domestic output and imports.· Thailand’s lower base oils supply coincides with rising domestic base oils and lube demand.· Its lower base oils supply curbs its ability to cover for slump in Group I supplies from Japan.· Any sustained pick-up in country’s domestic demand could complicate further its ability to provide additional supplies to cover for loss of supplies from Japan..· Thailand’s October base oils supply still exceeds demand for first time in three months as slump in exports outweighs low domestic production..· Wave of exports to markets like UAE and India in Sept 2023 especially had left Thailand’s supply more balanced.· More balanced supply curbed pressure on Thailand’s producers to accept base oils prices that made feasible more arbitrage shipments at start of Q4 2023.· Small size of supply surplus in Oct 2023 continued to curb that pressure.· Any rise in Thailand’s base oils output in Nov-Dec 2023 could speed up a rise in country’s supply surplus and subsequent need to clear those volumes through the export market..· Indonesia’s October Group III base oils exports hold steady to Europe, pause to China for fourth month..· Shipments to Europe hold steady despite pressure on Group III prices in European market.· Price pressure reflects more the plentiful availability of supplies with no or some OEM approvals.· Prices for supplies with OEM approvals remain much firmer, reflecting the balanced-to-tighter fundamentals for those supplies.· Sustained pause in Indonesia’s Group III base oils exports to China is longest since 2017.· Sustained pause could point to change in strategy.· Pause coincides with rise in China’s Group III base oils production capacity following start-up of new plant..· Singapore’s base oils imports stay lower than usual in recent weeks amid ongoing pause in shipments from Japan, slowdown in supplies from China..· Any recovery in supplies from Japan is likely to remain muted following closure of Group I plant in Oct 2023.· Drop in imports from Japan increases need for alternative supply source to cover for drop in volumes.· Most recent shipment from Italy to Singapore was more than a month ago.· India’s base oils imports show signs of surging in Nov 2023 on back of rise in supplies from South Korea and US.· Sustained wave of shipments from South Korea to India likely to sustain high imports in Dec 2023..· Asia’s October base oils exports rise even with fall in shipments from Taiwan, Japan and Thailand..· Shipments rise even with limited overhang of surplus supplies to clear from Q3 2023.· Shipments rise because of rebound in South Korea’s exports in Oct 2023.· Trend highlights impact of South Korea’s exports on regional supply and in determining size of any regional supply-build at end-Q4 2023 and in early 2024..Asia base oils - week of Dec 11: Demand outlook.Global base oils - week of Dec 11: Demand outlook.Global base oils - week of Dec 11: Price outlook - arbitrage.Global base oils - week of Dec 11: Price outlook - margins
· Asia’s base oils supply faces prospect of rising following expected completion of plant maintenance, addition of arbitrage shipments and weaker demand.· US Group II export prices flip to discount to cfr India prices, boosting feasibility of more arbitrage shipments to that market.· More competitive US export prices complicate feasibility of moving more Asia shipments to Latin America.· China’s domestic Group II light-grade prices remain weak versus fob Asia prices, complicating arbitrage flows to China.· Cargo of Group II base oils set to load from Taiwan in coming days.· Shipment coincides with expected restart of Group II base oils unit in 1H Dec 2023.· Supplies from Japan show signs of falling sharply, while flows from Europe to southeast Asia pause over past month.· Trend likely to support firmer Group I prices relative to other grades..· China’s November base oils output rises to twenty-month high on higher Group I/Group II production..· China’s higher base oils output covers more of the country’s domestic requirements, curbing attraction/need for more supplies from overseas markets.· Domestic buyers’ preference to maintain low stocks adds to attraction of procuring supplies from domestic refiners.· Trend suggests that China’s demand for overseas base oils supplies is likely to stay muted even if demand improves over the coming months..· Japan’s October base oils exports fall to two-year low following closure of second base oils plant..· Exports fall more steeply than Japan’s base oils production and demand in Oct 2023.· Trend points to sufficient supply to cover domestic requirements, with exports bearing the main impact of the plant closure.· Slump in exports to Singapore and South Korea raises prospect of those markets seeking alternative supplies of Group I base oils.· Tight regional availability of Group I base oils incentivizes those markets to instead move to replace Group I base oils with premium-grade base oils where possible.· Even that move would require large volumes of additional supplies from other sources..· Thailand’s October base oils supply stays low amid lower domestic output and imports.· Thailand’s lower base oils supply coincides with rising domestic base oils and lube demand.· Its lower base oils supply curbs its ability to cover for slump in Group I supplies from Japan.· Any sustained pick-up in country’s domestic demand could complicate further its ability to provide additional supplies to cover for loss of supplies from Japan..· Thailand’s October base oils supply still exceeds demand for first time in three months as slump in exports outweighs low domestic production..· Wave of exports to markets like UAE and India in Sept 2023 especially had left Thailand’s supply more balanced.· More balanced supply curbed pressure on Thailand’s producers to accept base oils prices that made feasible more arbitrage shipments at start of Q4 2023.· Small size of supply surplus in Oct 2023 continued to curb that pressure.· Any rise in Thailand’s base oils output in Nov-Dec 2023 could speed up a rise in country’s supply surplus and subsequent need to clear those volumes through the export market..· Indonesia’s October Group III base oils exports hold steady to Europe, pause to China for fourth month..· Shipments to Europe hold steady despite pressure on Group III prices in European market.· Price pressure reflects more the plentiful availability of supplies with no or some OEM approvals.· Prices for supplies with OEM approvals remain much firmer, reflecting the balanced-to-tighter fundamentals for those supplies.· Sustained pause in Indonesia’s Group III base oils exports to China is longest since 2017.· Sustained pause could point to change in strategy.· Pause coincides with rise in China’s Group III base oils production capacity following start-up of new plant..· Singapore’s base oils imports stay lower than usual in recent weeks amid ongoing pause in shipments from Japan, slowdown in supplies from China..· Any recovery in supplies from Japan is likely to remain muted following closure of Group I plant in Oct 2023.· Drop in imports from Japan increases need for alternative supply source to cover for drop in volumes.· Most recent shipment from Italy to Singapore was more than a month ago.· India’s base oils imports show signs of surging in Nov 2023 on back of rise in supplies from South Korea and US.· Sustained wave of shipments from South Korea to India likely to sustain high imports in Dec 2023..· Asia’s October base oils exports rise even with fall in shipments from Taiwan, Japan and Thailand..· Shipments rise even with limited overhang of surplus supplies to clear from Q3 2023.· Shipments rise because of rebound in South Korea’s exports in Oct 2023.· Trend highlights impact of South Korea’s exports on regional supply and in determining size of any regional supply-build at end-Q4 2023 and in early 2024..Asia base oils - week of Dec 11: Demand outlook.Global base oils - week of Dec 11: Demand outlook.Global base oils - week of Dec 11: Price outlook - arbitrage.Global base oils - week of Dec 11: Price outlook - margins
