· US domestic base oils prices stabilize at low level versus feedstock/competing fuel prices.· Low margins, and firm diesel premium to crude, continue to incentivize refiners to boost output of middle distillates rather than base oils.· Steady US spot prices and higher posted prices for some products point to more manageable surplus supply than this time a year earlier.· Size of surplus supply likely to dwindle in coming month as start of seasonal pick-up in demand coincides with plant maintenance work.· Surge in US base oils/lube exports to Mexico in Dec 2024 points to ongoing surplus to clear at year-end..· Drop in US base oils/lube exports to other markets suggests surge in flows to Mexico was sufficient to limit size of supply-build.· Rise in exports to Mexico and subsequent drop in shipments to other markets could have cushioned downward pressure on base oils spot prices.· Fall in total exports in Dec 2024 follows drop in US base oils output in Nov 2024..· Drop in output partly reflects impact of unscheduled production issues.· Drop in output also coincides with lower base oils margins and seasonal dip in overseas/domestic demand, incentivizing refiners to trim run-rates..· Any moves to trim run-rates in anticipation of seasonal fall in demand would point to more concerted moves to limit supply-build at year-end.· Either way, surplus of supply over demand stays at more manageable levels in Nov 2024..· Signs of slowdown in US base oils imports in Dec 2024 raise prospect of extending that dynamic to year-end.· Any further moves that leave US base oils output at lower-than-usual levels would cut supply further.· Such a scenario would leave supply-surplus at more manageable levels at start of 2025.· US base oils imports account for more than 70% of domestic supply in Nov 2024..· Trend suggests Group III base oils accounts for larger-than-usual share of domestic surplus at year-end, with Group II base oils accounting for lower-than-usual share..· Argentina’s base oils supply could be more balanced at start of 2025 following surge in exports in Q4 2024..· Pick-up in exports extends into 2025, tapping tighter global availability of Group I base oils.· Extended pick-up in exports into 2025 could coincide with recovery in Argentina’s domestic lube consumption.· Any recovery in consumption could trigger rise in demand for premium-grade supplies from overseas markets, rather than rise in demand for more Group I base oils..· Europe’s base oils supply shows signs of holding at more manageable levels for most grades, at time of year when weak demand often triggers build-up of surplus volumes.· Europe’s Group I base oils supply stays relatively low in Oct-Nov 2024, partly because of rebound in exports to markets outside Europe..· Lower supply limits size of supply-build at year-end, curbs pressure on refiners to adjust prices to levels that open arbitrage to markets like India.· Less volatile price activity, and more muted pressure to clear surplus volumes, could support earlier revival in demand..· Europe’s Group II base oils supply falls to seven-month low in Nov 2024..· Including unusual surge in Netherlands’ refinery consumption, Europe’s premium-grade base oils supply falls to lowest since mid-2022..· Drop in supply raises prospect of curbing size of surplus Group II base oils volumes carried over into start of this year..· Europe’s supply of Group III base oils with full set of OEM approvals could stay tighter than usual.· Spain’s Group III base oils exports rise to five-month high in Jan 2025..· Exports remain well below typical shipment volumes of close to 50,000 tonnes/month in first eight months of 2024, before plant maintenance work from end-Q3 2024..US’ November base oils output falls.Brazil’s Dec base oil supply lags demand.Italy’s Dec lube demand extends fall.Asia base oils supply outlook: Week of 10 Feb.Global base oils margins outlook: Week of 10 Feb.Global base oils arb outlook: Week of 10 Feb.Global base oils cargo flows: Week of 10 Feb.Base Oil News stories and analyses also available on the ICIS platform
