![Asia base oils - week of Jan 8: Supply outlook](http://media.assettype.com/baseoilnews%2F2022-04%2F2eeddb5e-d6dd-4142-b34a-c815a8dc91e4%2Fscenic_view_oil_refinery_sunrise_asia_freepik.jpg?rect=0%2C553%2C5310%2C2987&w=480&auto=format%2Ccompress&fit=max)
· Asia’s base oils supply enters new year with more limited surplus amid lower-than-usual exports from key sources like Singapore, Taiwan and Japan.
· Surplus stays manageable even with ongoing flow of arbitrage shipments from US to India.
· Supply likely to get further boost from gradual revival in exports from Taiwan.
· Regional Group I supply stays tighter than Group II/Group III supply, attracting additional shipments from Europe/Russia.
· Asia’s Group II premium to Group I base oils stays narrow, ICIS data shows.
· Narrow Group II premium highlights structurally tighter Group I supplies vs Group II base oils.
· Removal of Asia Group II heavy-grade supply surplus could get more complicated as arbitrage to move cargoes to Latin America gets harder to work.
· Arbitrage to move US cargoes to India/Mideast Gulf stays feasible, adding to complication of removing any surplus Asia supplies from the region.
· Arbitrage to move Asia Group II cargoes to Europe gets more feasible, boosting attraction of targeting that region with more supplies.
· China’s December base oils output rises to highest in almost two years.
· Rising output, and capacity for production to rise much higher, would likely cover most of any recovery in China’s base oils demand.
· Trend highlights importance for Asia’s base oils refiners to target other markets instead of China.
· South Korea’s November base oils output rises to six-month high.
· Rising output contrasts with fall in South Korea’s November base oils exports.
· Contrasting trends raise prospect of supply-build and need to clear more supplies over following weeks, especially of Group III base oils.
· Signs of rise in South Korea’s base oils exports in December point to pick-up in Group III shipments especially.
· Shipments show signs of rising even as global Group III base oils prices face sustained downward pressure.
· Japan’s November base oils supply falls further as output extends drop for eighth month.
· Drop in output likely to be long-lasting, set to cut surplus supply for export to other markets in Asia.
· Structural fall in Asia’s Group I base oils supply increases incentive/need for blenders to minimize consumption of Group I base oils and use more premium-grade supplies instead.
· Thailand’s November base oils output stays lower than usual for third month.
· Lower base oils output compounds tighter regional Group I base oils supply following closure of Group I plant in Japan in Oct 2023.
· Lower Group I supply limits any supply-build at end-2023.
· Scheduled plant maintenance work in Thailand in Jan 2024 set to trim output further, likely to coincide with round of regional stock-building ahead of seasonal pick-up in demand later in Q1 2024.
· India’s November base oils output rises for twelfth time in thirteen months, boosts total supply to eight-month high.
· India’s base oils output rises to record-high levels in Jan-Nov 2023, even ahead of start-up of new production capacity.
· India’s base oils output likely to extend rise in 2024 as new units start operations.
· Rising output likely to have widespread repercussions for overseas suppliers.
· Singapore’s base oils shipments slump in 2H Dec 2023, likely slashing December exports to lowest in at least a year.
· Any extension of slowdown in shipments would suggest the drop in exports more likely to be linked to factors like plant maintenance work or run-cuts rather than to seasonal factors.
· Singapore’s Group I base oils supply likely gets boost following arrival of large shipment from Europe in past week, and a shipment from Russia in late-Dec 2023.
· Shipments from those sources should help to balance out pause in supplies from Japan to Singapore since Nov 2023.