Americas/EMEA base oils – week of April 3: Supply outlook

·        Diesel premium to crude holds at lowest in more than a year, much higher than long-term average.

·        Firm diesel premium incentivizes refiners to maintain high middle distillates output.

·        Base oils plant maintenance work to gather pace in Europe, Asia in Q2 2023, slow down in US.

·        US supply set to get boost following imminent restart of base oils unit after completion of maintenance work.

·        Signs of arbitrage shipments from US to Africa/India reflect persistent surplus – and help to remove some of the surplus.

·        Argentina’s February domestic output rises, covering for pause in arbitrage shipments, despite availability of surplus supplies in US.

·        Move highlights relative complication of moving surplus US supplies to Argentina and their need to target more distant markets instead.

·        Arbitrage shipments of heavy grades from Asia continue to move to Latin America in Q1 2023.

·        US supplies move to Nigeria despite plentiful availability of Russian base oils at steeply-discounted prices.

·        Shipment of US supplies to Nigeria highlights complications of moving Russian base oils to the West African country.

·        Nigeria covers requirements in early 2023 with surge in European shipments in Dec-Jan.

·        Slowdown in Europe and Baltic shipments to Nigeria since then boost importance of sources like US.

·        Scenario raises prospect of repeating trend of 1H 2022, when US shipments to Nigeria surged.

·        Slowdown in European arbitrage Group I shipments points to more balanced-to-tighter regional supply.

·        Netherlands’ high base oils output in late 2022 and early 2023 coincides with unusually weak regional demand and lower Europe Group II prices.

·        Netherlands’ high output complicates flow of shipments from US to Europe, adding to surplus in Americas.

·        Europe's premium-grade supplies need to fall, or demand rise, to revive more regular flow of larger volumes from US to the region.