Americas/EMEA base oils – week of Apr 10: Supply outlook

·        Diesel premium to crude falls to lowest in more than a year.

·        Lower diesel premium cuts attraction of producing more of the motor fuel instead of other products unless prices for other products are also low.

·        US base oils supply set to improve in coming weeks following likely completion of extended plant shutdown.

·        US base oils exports show signs of slowing in February – raising prospect of sustaining high domestic stocks unless output fell.

·        US base oils exports likely to need to stay higher as output revives – unless domestic demand rises strongly.  

·        US Gulf coast base oils output rises in January even as middle distillates output falls.

·        Rising base oils output in US/Italy/Spain in early 2023 contrasts with muted demand - highlighting importance of responding to regional and overseas prices to maintain balanced fundamentals.     

·        Volatility of volume of US base oil imports from South Korea in recent months points to some kind of structural change.

·        Plant maintenance in Europe, removal of surplus cargoes in Q1 2023, and loss of Russian supplies could tighten availability in current quarter.

·        Europe Group II supply overhang likely to face less pressure from US supplies amid signs of slowdown in shipments.

·        Spain’s January Group I base oils output rises, mirroring similar trend in Italy.

·        Signs of steep rise in supply in Europe in January coincided with clear, well sign-posted slowdown in demand.

·        Repercussion was predictable – additional oversupply, and additional downward pressure on prices.

·        Clear signs of weak demand suggests some of that oversupply and price pressure could have been avoided.

·        Europe’s base oils supply had mostly remained lower than usual in late 2022; unclear why it rose sharply in January when demand was weak.

·        Healthy availability globally means prices must be more responsive – or supply builds fast as buyers cover requirements with supplies from elsewhere.

·        Surge in Spain’s premium-grade base oils exports in March could reflect moves to build stocks ahead of plant shutdown later in Q2.