Americas/EMEA base oils supply outlook: Week of 14 Oct

·        US base oils price premium to feedstock/competing fuel prices extends fall.

·        Domestic/export price premium stays at level that incentivizes refiners to maintain higher output levels for now.

·        Output shows signs of staying lower despite firm margins.

·        Pick-up in US surplus supply could also be smaller than expected at start of Q4 2024 despite firm margins.

·        Surplus supply could be smaller after steady flow of shipments to markets like West Africa, Turkey and India during Q3 2024.

·        Trend shows signs of extending into early-Q4 2024.

·        US base oils/lube exports rebound to five-month high in Aug 2024, reflecting that trend.

·        Exports include surge in shipments to Africa to multi-year high.

·        Rise in shipments to markets like Africa points to moves to start clearing surplus volumes well before end of Q3 2024.

·        The moves raise prospect of leaving smaller-than-expected build-up of surplus volumes in Q3 2024.

·        Scheduled and unexpected plant maintenance in US at start of Q4 2024 set to cut base oils output, cushioning impact of slowdown in demand.

·        Prospect of lower-than-expected supply-surplus at end-Q3 2024 and drop in output at start of Q4 2024 could delay any need or moves to clear larger surplus volumes.

·        US base oils imports fall to three-month low in Aug 2024.

·        Drop in shipments adds to prospect of lower supply in Aug 2024 and smaller surplus at end-Q3 2024.

·        US base oils imports from South Korea stay higher than usual in Aug 2024, contrasting with further slide in shipments from Middle East.

·        Contrasting flows reverse trend of rising shipments from Middle East and slump in imports from South Korea in H1 2024.

·        Contrasting flows could suggest lower US Group III prices have more impact on supplies from Middle East than from South Korea.

·        Contrasting flows coincide with signs of more widespread slowdown in shipments from Qatar in July-Aug 2024.

·        US and Asia imports from Qatar combined fall to eleven-month low in Aug 2024.

·        Imports fall from already-lower-than-usual volume in July 2024.

·        Sustained slowdown in shipments from Qatar is unusual.

·        US base oils imports in Aug 2024 include largest-ever shipment from Saudi Arabia.

·        Rise in imports follows shipment of large cargo from Saudi Arabia to Argentina in Q3 2024 and rise in flows to southeast Asia.

·        Trend could point to moves by Saudi Arabia to diversify its outlets and trim flow of supplies to UAE and India.

·        Europe’s Group I base oils supply could be more balanced as recent pick-up in shipments to markets like West Africa removes some surplus volumes.

·        Recent production issues and upcoming plant maintenance work could trim supply further.

·        Less attractive arbitrage could prompt more overseas Group I shipments to move to other markets rather than to Europe.

·        Removal of surplus shipments follows signs of rise in stocks in Q3 2024 as weak demand outweighs lower output in markets like Italy.

·        Italy’s base oils stocks rise to three-month high even as output falls to lowest this year.

·        Contrasting trends reflect slump in Italy’s base oils consumption.

·        Weakness of base oils demand partly reflects steep fall in domestic lube consumption in Aug 2024.

·        Weakness also points to more muted overseas demand even amid dwindling availability of Group I base oils.

·        Trend points to structural fall in demand for Group I base oils, leaving Europe’s refiners facing build-up of surplus supplies even with lower structural supply and drop in output.

·        Trend leaves Europe’s refiners facing build-up of surplus supplies.

·        Europe’s Group II base oils supply could face less upward pressure if shipments from US stay lower.

·        US base oils exports to Europe fall in Aug 2024, contrasting with rise in US shipments to Africa.

·        Contrasting trends curb prospect of large supply-build in Europe.

·        Prospect of more limited supply-build eases pressure on Europe’s Group II prices.

·        Europe’s firm Group II prices support rise in premium to US prices to highest since March 2024, making arbitrage increasingly attractive.

·        US engine oils exports to Europe see unusual surge in Aug 2024 even before recent rebound in Group II premium to US prices.

·        Europe’s supply of Group III base oils with full set of OEM approvals could tighten because of scheduled plant maintenance work.

·        Spain’s exports of premium-grade base oils to northwest Europe included at least one large cargo in first half of each month since March 2024.

·        There were no such shipments so far in H1 Oct 2024.