· US base oils supply likely to improve amid firm margins, weak diesel prices, more limited arbitrage opportunities and completion of recent maintenance work.· Squeezed arbitrage opportunities suggest US supply is tight, curbing need to remove surplus supplies from domestic market.· Squeezed arbitrage opportunities could trigger faster recovery in supply, with any surplus volumes likely to stay in domestic market for longer.· Production of Group III base oils, and lower yield from production of Group III base oils compared with Group II base oils, could slow pace of build-up of surplus supplies..· Firming US Group II light-grade prices and tighter supply could incentivize US refiners to produce more Group II base oils rather than Group III base oils.· Refiners had been incentivized to produce Group III base oils partly because of their higher margins and partly because of weak US Group II demand.· Any subsequent recovery in Group II base oils supply, combined with weak Group II demand, could return the market to a situation of surplus supply and downward pressure on prices.· Such a scenario would also require additional supplies of imported Group III base oils.· Prospect of such an outcome could boost attraction of maintaining current Group II and Group III production levels. · Such a trend would slow any build-up of surplus Group II light-grade supplies..· Argentina’s April base oils supply rebounds to seven-month high, contrasting with and outpacing sliding demand..· Rise in supply replenishes stocks that distributors and blenders sought to maintain at lower levels.· Higher stocks could trigger subsequent slowdown in supply in coming months.· Any slowdown in supply would require drop in domestic base oils output or lower imports.· Any slowdown in imports would impact US suppliers the most..· Europe’s Group I base oils supply shows signs of tightening earlier this year for export market, with availability sufficient for longer for domestic market.· Initial strength of Europe’s Group I bright stock export price relative to domestic price since early this year reflected that trend.· Recent plant closure in Italy exposes even domestic market to risk of unexpected supply tightness amid lack of surplus Group I capacity.· Shrinking capacity magnifies impact of any unexpected production issues, which duly materialized in recent weeks.· Tight supply and firmer prices boost attraction of moving additional shipments to northwest Europe from producers like Greece as well as other sources like Egypt, Saudi Arabia and US.· Signs of more frequent Group I shipments from US to Europe coincide with increasingly firm Europe Group I price differential to US prices.· Italy’s April base oils output rises from March 2024, contrasting with slump in base oils consumption in April to nineteen-month low..· Trend points to focus on stock-building and more immediate drop in availability of supplies for export market..· UK’s base oils market points to similar trend as supply rebounds to ten-month high in March 2024.· Rising supply contrasts with muted demand as unusually low base oils exports counter firm domestic consumption..· Trend triggers surge in surplus supply to multi-year high.· Rising surplus and weak exports point to signs of stock-building and focus on domestic/regional market..· Steady availability of Group II base oils in Europe contrasts with tighter and more volatile availability of Group I base oils.· More regular shipment time for most imports of Group II base oils contrast with extended shipment time for Group III base oils from Middle East and Asia.· Less attractive arbitrage to move US cargoes to Europe could leave region more reliant on supplies from within Europe.· Europe’s Group III base oils prices maintain premium to US and Asia prices, but premium narrows.· Europe’s narrower Group III premium and US refiners’ incentive to boost output of Group II base oils could incentivize overseas refiners to start moving more shipments to US or keep more supplies in Asia.· Any such trend would help to ease pick-up in Group III shipments to Europe in recent months.· Shipments of premium-grade base oils from Spain show signs of slipping in May 2024 from previous month amid slowdown in flows to northwest Europe..· Global base oils exports fall in March to Nigeria, Egypt and Kenya, rise to South Africa amid slowdown in supplies from US.· Trend highlights reliance on Europe of key markets in Africa..· Trend raises prospect of growing volatility of supplies as Europe’s structural base oils output continues to shrink.· Trend increases importance for those markets to line up alternative sources to ensure stability of supply.· Several cargoes from Saudi Arabia set to arrive in UAE in H1 June 2024.· Cargoes would help cover for slowdown in shipments from US and Europe.· Any more sustained pick-up in shipments could extend slowdown in buying interest in supplies from more distant markets like Asia. .Americas/EMEA base oils demand outlook: Week of 3 June.Asia base oils supply outlook: Week of 3 June.Global base oils cargo flows: Week of 3 June.Global base oils arb outlook: Week of 3 June
· US base oils supply likely to improve amid firm margins, weak diesel prices, more limited arbitrage opportunities and completion of recent maintenance work.· Squeezed arbitrage opportunities suggest US supply is tight, curbing need to remove surplus supplies from domestic market.· Squeezed arbitrage opportunities could trigger faster recovery in supply, with any surplus volumes likely to stay in domestic market for longer.· Production of Group III base oils, and lower yield from production of Group III base oils compared with Group II base oils, could slow pace of build-up of surplus supplies..· Firming US Group II light-grade prices and tighter supply could incentivize US refiners to produce more Group II base oils rather than Group III base oils.· Refiners had been incentivized to produce Group III base oils partly because of their higher margins and partly because of weak US Group II demand.· Any subsequent recovery in Group II base oils supply, combined with weak Group II demand, could return the market to a situation of surplus supply and downward pressure on prices.· Such a scenario would also require additional supplies of imported Group III base oils.· Prospect of such an outcome could boost attraction of maintaining current Group II and Group III production levels. · Such a trend would slow any build-up of surplus Group II light-grade supplies..· Argentina’s April base oils supply rebounds to seven-month high, contrasting with and outpacing sliding demand..· Rise in supply replenishes stocks that distributors and blenders sought to maintain at lower levels.· Higher stocks could trigger subsequent slowdown in supply in coming months.· Any slowdown in supply would require drop in domestic base oils output or lower imports.· Any slowdown in imports would impact US suppliers the most..· Europe’s Group I base oils supply shows signs of tightening earlier this year for export market, with availability sufficient for longer for domestic market.· Initial strength of Europe’s Group I bright stock export price relative to domestic price since early this year reflected that trend.· Recent plant closure in Italy exposes even domestic market to risk of unexpected supply tightness amid lack of surplus Group I capacity.· Shrinking capacity magnifies impact of any unexpected production issues, which duly materialized in recent weeks.· Tight supply and firmer prices boost attraction of moving additional shipments to northwest Europe from producers like Greece as well as other sources like Egypt, Saudi Arabia and US.· Signs of more frequent Group I shipments from US to Europe coincide with increasingly firm Europe Group I price differential to US prices.· Italy’s April base oils output rises from March 2024, contrasting with slump in base oils consumption in April to nineteen-month low..· Trend points to focus on stock-building and more immediate drop in availability of supplies for export market..· UK’s base oils market points to similar trend as supply rebounds to ten-month high in March 2024.· Rising supply contrasts with muted demand as unusually low base oils exports counter firm domestic consumption..· Trend triggers surge in surplus supply to multi-year high.· Rising surplus and weak exports point to signs of stock-building and focus on domestic/regional market..· Steady availability of Group II base oils in Europe contrasts with tighter and more volatile availability of Group I base oils.· More regular shipment time for most imports of Group II base oils contrast with extended shipment time for Group III base oils from Middle East and Asia.· Less attractive arbitrage to move US cargoes to Europe could leave region more reliant on supplies from within Europe.· Europe’s Group III base oils prices maintain premium to US and Asia prices, but premium narrows.· Europe’s narrower Group III premium and US refiners’ incentive to boost output of Group II base oils could incentivize overseas refiners to start moving more shipments to US or keep more supplies in Asia.· Any such trend would help to ease pick-up in Group III shipments to Europe in recent months.· Shipments of premium-grade base oils from Spain show signs of slipping in May 2024 from previous month amid slowdown in flows to northwest Europe..· Global base oils exports fall in March to Nigeria, Egypt and Kenya, rise to South Africa amid slowdown in supplies from US.· Trend highlights reliance on Europe of key markets in Africa..· Trend raises prospect of growing volatility of supplies as Europe’s structural base oils output continues to shrink.· Trend increases importance for those markets to line up alternative sources to ensure stability of supply.· Several cargoes from Saudi Arabia set to arrive in UAE in H1 June 2024.· Cargoes would help cover for slowdown in shipments from US and Europe.· Any more sustained pick-up in shipments could extend slowdown in buying interest in supplies from more distant markets like Asia. .Americas/EMEA base oils demand outlook: Week of 3 June.Asia base oils supply outlook: Week of 3 June.Global base oils cargo flows: Week of 3 June.Global base oils arb outlook: Week of 3 June
