· US base oils supply could get boost from ongoing rebound in base oils premium to feedstock/competing fuel prices..· Rebounding base oils premium to VGO coincides with rise in total US refinery crude input levels at end-May 2024 to highest since late-2019 amid unusually high run-rates.· High US refinery run-rates and high base oils premium to diesel adds to prospect of rise in base oils output.· US Group II light-grade base oils discount to Group III 4cSt prices holds at narrowest since Q1 2020.· Strength of Group II prices relative to Group III prices provides growing incentive for refiners to produce more Group II base oils.· Incentive to produce more Group II base oils would increase further if discount to Group III prices shows signs of staying narrower for an extended time.· Strength of Group II prices relative to Group III prices could conversely trigger slowdown in domestic output of Group III base oils, boosting need for additional imports.· US Group II base oils supply could get further boost from less feasible arbitrage to growing number of outlets, curbing removal of any surplus volumes from domestic market.· US Group III supplies from overseas markets could get a boost in July 2024 amid signs of pick-up in flows from Asia and Bahrain..· US’ base oils/lube supply already rises to seventeen-month high in March 2024 as output surges..· Output rises despite unusually weak domestic and export prices and muted domestic demand at that time.· Necessity to clear large volume of surplus supplies through overseas markets keeps US export prices unusually weak for longer.· Weak prices reflect impact and cost of oversupply..· Brazil’s April base oils supply stays higher than usual on firm domestic output and imports.· Brazil’s April demand rises to 25-month high as exports climb, domestic lube consumption revives..· Supply surplus duly falls to narrowest in seven months.· Brazil’s base oils output and imports would need to remain high if demand stays higher than usual.· Firm imports would require that shipments from the US stay higher than usual.· Such a scenario could be more complicated if US supply stays tighter. · Brazil’s base oils exports would need to stay higher to balance out higher supply.· Overseas demand for Brazil’s base oils could get a boost amid tighter surplus supply from US and Europe and signs of pick-up in Group I shipments from US to Europe..· Europe’s Group I export price premium to VGO extends rise to highest in more than a year; Group I domestic premium rises to highest since mid-2023..· Rising premium and weak diesel premium to crude incentivizes refiners to maximise Group I output.· Lack of spare Group I base oils capacity complicates any such moves, prolonging tighter supply fundamentals.· Europe’s tighter Group I base oils supply and firm domestic prices boost attraction of moving more shipments to the region from other markets.· Several cargoes from US and Saudi Arabia scheduled to reach northwest Europe in coming week.· Rising domestic Europe brightstock price and falling FOB Asia brightstock price makes more feasible arbitrage to move cargoes from that region to outlets like India and Middle East, even if not yet Europe..· Europe’s March Group I base oils supply rebounds to five-month high amid signs of stock-building of the grade in markets like Italy and UK.· Tight Group I supplies in Q2 2024 suggest any stock-building provided limited buffer for regional market.· Tight Group I supplies suggest that any unexpected Group I production issues more than outweigh benefit of any stock-building, highlighting region’s tight structural supply of the grade.· Europe’s March Group II base oils supply falls to lowest in more than five years.· Steady-to-weak Group II base oils prices in Q1 2024 and muted rise in Group II prices in Q2 2024 point to sufficient supply to meet seasonal rise in demand even with lack of stock-building in Q1 2024..· Europe’s March Group III base oils supply accounts for largest share of region’s base oils supply for just third time.· Rebounding availability of Group III base oils shows signs of extending into Q2 2024, boosting incentive for regional blenders to use more of the supplies in their formulations..· Netherlands’ March base oils output almost halts for first time in more than five years..· Europe’s Group II base oils prices hold steady-to-weaker relative to VGO and Group I prices in Q1 2024 even with fall in supply.· Pick-up in Group II shipments from overseas markets cushions impact of lower regional supply..· Europe’s steady Group II prices in Q1 2024 and rise in imports highlights the product’s growing number of alternative sources even with shutdown of region’s sole virgin Group II base oils unit.· Sufficient Group II supply contrasts with Europe’s tightening Group I supply and rising Group I prices relative to other base oils grades.· Importance of stable base oils supplies could boost attraction for blenders to use more Group II base oils in their formulations..Americas/EMEA base oils demand outlook: Week of 10 June.Asia base oils supply outlook: Week of 10 June.Global base oils arb outlook: Week of 10 June.Global base oils cargo flows: Week of 10 June
· US base oils supply could get boost from ongoing rebound in base oils premium to feedstock/competing fuel prices..· Rebounding base oils premium to VGO coincides with rise in total US refinery crude input levels at end-May 2024 to highest since late-2019 amid unusually high run-rates.· High US refinery run-rates and high base oils premium to diesel adds to prospect of rise in base oils output.· US Group II light-grade base oils discount to Group III 4cSt prices holds at narrowest since Q1 2020.· Strength of Group II prices relative to Group III prices provides growing incentive for refiners to produce more Group II base oils.· Incentive to produce more Group II base oils would increase further if discount to Group III prices shows signs of staying narrower for an extended time.· Strength of Group II prices relative to Group III prices could conversely trigger slowdown in domestic output of Group III base oils, boosting need for additional imports.· US Group II base oils supply could get further boost from less feasible arbitrage to growing number of outlets, curbing removal of any surplus volumes from domestic market.· US Group III supplies from overseas markets could get a boost in July 2024 amid signs of pick-up in flows from Asia and Bahrain..· US’ base oils/lube supply already rises to seventeen-month high in March 2024 as output surges..· Output rises despite unusually weak domestic and export prices and muted domestic demand at that time.· Necessity to clear large volume of surplus supplies through overseas markets keeps US export prices unusually weak for longer.· Weak prices reflect impact and cost of oversupply..· Brazil’s April base oils supply stays higher than usual on firm domestic output and imports.· Brazil’s April demand rises to 25-month high as exports climb, domestic lube consumption revives..· Supply surplus duly falls to narrowest in seven months.· Brazil’s base oils output and imports would need to remain high if demand stays higher than usual.· Firm imports would require that shipments from the US stay higher than usual.· Such a scenario could be more complicated if US supply stays tighter. · Brazil’s base oils exports would need to stay higher to balance out higher supply.· Overseas demand for Brazil’s base oils could get a boost amid tighter surplus supply from US and Europe and signs of pick-up in Group I shipments from US to Europe..· Europe’s Group I export price premium to VGO extends rise to highest in more than a year; Group I domestic premium rises to highest since mid-2023..· Rising premium and weak diesel premium to crude incentivizes refiners to maximise Group I output.· Lack of spare Group I base oils capacity complicates any such moves, prolonging tighter supply fundamentals.· Europe’s tighter Group I base oils supply and firm domestic prices boost attraction of moving more shipments to the region from other markets.· Several cargoes from US and Saudi Arabia scheduled to reach northwest Europe in coming week.· Rising domestic Europe brightstock price and falling FOB Asia brightstock price makes more feasible arbitrage to move cargoes from that region to outlets like India and Middle East, even if not yet Europe..· Europe’s March Group I base oils supply rebounds to five-month high amid signs of stock-building of the grade in markets like Italy and UK.· Tight Group I supplies in Q2 2024 suggest any stock-building provided limited buffer for regional market.· Tight Group I supplies suggest that any unexpected Group I production issues more than outweigh benefit of any stock-building, highlighting region’s tight structural supply of the grade.· Europe’s March Group II base oils supply falls to lowest in more than five years.· Steady-to-weak Group II base oils prices in Q1 2024 and muted rise in Group II prices in Q2 2024 point to sufficient supply to meet seasonal rise in demand even with lack of stock-building in Q1 2024..· Europe’s March Group III base oils supply accounts for largest share of region’s base oils supply for just third time.· Rebounding availability of Group III base oils shows signs of extending into Q2 2024, boosting incentive for regional blenders to use more of the supplies in their formulations..· Netherlands’ March base oils output almost halts for first time in more than five years..· Europe’s Group II base oils prices hold steady-to-weaker relative to VGO and Group I prices in Q1 2024 even with fall in supply.· Pick-up in Group II shipments from overseas markets cushions impact of lower regional supply..· Europe’s steady Group II prices in Q1 2024 and rise in imports highlights the product’s growing number of alternative sources even with shutdown of region’s sole virgin Group II base oils unit.· Sufficient Group II supply contrasts with Europe’s tightening Group I supply and rising Group I prices relative to other base oils grades.· Importance of stable base oils supplies could boost attraction for blenders to use more Group II base oils in their formulations..Americas/EMEA base oils demand outlook: Week of 10 June.Asia base oils supply outlook: Week of 10 June.Global base oils arb outlook: Week of 10 June.Global base oils cargo flows: Week of 10 June
