· Americas’ base oils supply surplus could stay lower than usual at year-end.· Plant maintenance in Q4 2023 cuts supply in several regional markets.· Competitive US export prices support ongoing flow of arbitrage shipments.· Trend contrasts with US export prices in Q4 2022 that kept shut the arbitrage to key outlets.· Firm US domestic prices curb incentive for refiners to trim output.· Refiners’ growing focus on export markets could in turn limit impact of firm domestic prices on production decisions..· US’ September base oils/lube supply lags demand for fourth time in five months..· Supply shortfall curbs supply-build ahead of Q4 2023, when demand faces seasonal slowdown.· Supply shortfall highlights importance of high export volumes to maintain relative supply-demand balance..· Brazil’s October base oils supply rises to one-year high on surge in imports.· Higher supply outweighs demand, triggering rise in surplus to one-year high..· Large surplus could curb Brazil’s requirements for additional volumes through rest of Q4 2023.· Brazil’s requirements for overseas supplies are anyway likely to ease following scheduled completion of plant maintenance in Q4 2023.· Any build-up of surplus volumes in Q4 2023 could compound subsequent slowdown in requirements.· Any such slowdown would coincide with seasonal dip in US’ domestic demand and prospect of slowdown in shipments to Mexico..· Argentina’s October base oils supply falls to three-year low on drop in imports, pause in domestic production..· Lower supply contrasts with steady domestic lube demand.· Disconnect between supply and demand raises prospect of pick-up in requirements for overseas supplies at least through rest of Q4 2023.· US suppliers likely to be key beneficiaries of any pick-up in demand for overseas supplies as closed arbitrage from Asia slashes shipments from that region to Argentina since Q2 2023..· Europe’s Group I base oils supply shows signs of staying tighter than usual for time of year.· Signs of pick-up in flows of Group I base oils from Europe to Asia could curb any supply-build at year-end.· Europe’s Group II supply could get a boost as widening price premium to US/Asia prices boosts attraction of moving more arbitrage shipments to Europe.· Europe’s Group III supply faces slowdown in shipments from Spain in recent weeks, before pick-up in flows last week.· Rise in Group III shipments from UAE to Asia in recent weeks shows signs of curbing volumes bound for Europe.· Europe’s base oils supply holds steady in Q3 2023 vs Q2 2023, falls 9pc yoy..· Steady supply in Q3 2023 vs Q2 2023 contrasts with typical rise in supply in Q3 from Q2.· Steady supply counters impact of seasonal slowdown in regional lube demand in Q3 2023.· Steady supply limits size of supply-build in Q3 2023, especially vs year-earlier levels. .· Europe’s Group II or Group III base oils account for largest share of Europe’s base oils market every month since June 2023..· Before June 2023, Europe’s Group I base oils almost always accounted for largest share of Europe’s base oils market.· Trend highlights structural change in Europe’s base oils market.· Sustained fall in Group I supply in in 2022 and 2023 and improving availability of Group II/III base oils incentivizes blenders to switch to premium-grade base oils to ensure security of supply.· Europe’s Group III base oils supply accounts for largest share of Europe’s base oils market in Sept 2023 for second time in four months.· Rising Group III base oils supply and market share coincides with sustained pressure on Group III prices.· Trend suggests rise in supply outweighs demand, contrasts with steadier-to-firmer Group II prices..Global base oils - week of Dec 11: Price outlook - margins.Global base oils - week of Dec 11: Price outlook - arbitrage.Americas/EMEA base oils - week of Dec 11: Demand outlook.Base Oil News stories and analysis also available on ICIS platform
