Americas/EMEA base oils supply outlook: Week of 15 April

·        US base oil export prices extend recovery vs feedstock/competing fuel prices.

·        US base oils domestic spot prices continue to trend lower vs feedstock/competing fuel prices.

·        Persistent US supply surplus in recent months suggests weak margins have smaller-than-usual impact on refiners’ base oils production plans.

·        Steady-to-firm base oils output despite lower margins coincides with weakening diesel premium to crude oil.

·        US Group III base oils prices extend sharp fall, dipping to discount to Europe prices for first time since Sept 2023.

·        Price-fall cuts attraction of moving more Group III shipments to the US.

·        Prices fall even with sustained slowdown in US base oils imports over past ten months to Feb 2024.

·        Fall in prices suggests US Group III base oils supply continued to exceed demand even with slowdown in shipments.

·        Rising US base oils export prices make arbitrage shipments less attractive, pointing to more manageable supply surplus for now.

·        Firmer prices and smaller surplus follow slide in export prices in Feb 2024 to help clear large surplus.

·        Surplus builds earlier this year after US base oils exports stay lower than usual in Feb 2024, when domestic demand typically falls sharply.

·        US export price discount to prices in markets like India and Europe stays relatively wide even after narrowing sharply.

·        Still-wide export-price discount points to moves to maintain steady exports to avoid another supply-build.   

·        US base oils exports to Mexico recover in Feb 2024, adding to signs that drop in shipments to the country has bottomed out.

·        US’ February base oils exports to Singapore rise to highest since 2017, extending recent pick-up in shipments to the island-state.

·        Any extension of that trend would help to support higher US exports and add to supplies in Asia-Pacific region, where demand faces slowdown in Q2 2024.

·        Shortfall of Latin Americas’ January base oils supply vs lube demand narrows to smallest volume in almost four years.

·        Smaller shortfall mostly reflects rebound in region’s base oils output.

·        Smaller shortfall cuts Latin America’s requirements for overseas shipments.

·        US exports to Latin America and Mexico duly fall in Jan 2024 to lowest in thirteen months.

·        Surplus of US exports over Latin America’s net demand stays unusually high in Jan 2024 even with drop in shipments.

·        Trend raises prospect of curbing region’s demand for overseas supplies over following months until surplus supply has fallen.

·        Europe’s Group I bright stock supply could tighten as competitive export prices boost attraction of moving more supplies to overseas markets.

·        Europe’s Group II base oils supply shows signs of staying tighter than usual throughout Q1 2024 amid plant maintenance work and lower supplies from US.

·        Supplies from US could stay lower following restart of Group II unit in Netherlands and narrower US export price discount to Europe prices.

·        Discount of US Group II export prices to Europe prices stays relatively wide even after narrowing from recent highs.

·        Europe’s Group III base oils supply could stay tighter in short-term amid regional plant maintenance work and signs of slowdown in shipments from UAE so far this year.

·        Recent slump in US Group III prices to discount to Europe prices could revive attraction of moving more shipments to Europe.

·        Indonesia’s Group III base oils exports to Europe pause in February for the second time in three months.

·        Trend raises prospect of curbing Europe’s Group III base oils supply from Asia through Q1 2024.

·        Cargo of Group III base oils from Indonesia reaches northwest Europe earlier this month after loading in March 2024.

·        Shipment time of less than 40 days for the cargo was shorter than the time for a January-loading cargo.

·        Shorter voyage time points to diminishing time impact of cargoes moving from Asia to Europe via southern Africa rather than Suez Canal.  

·        Europe’s base oils supply, or domestic output and imports combined, lags demand, or base oil imports and lube demand combined, in Jan 2024 for second time in three months.

·        Europe’s base oils supply usually exceeds demand in the month of January.

·        Supply shortfall at start of the year raises prospect of limiting size of regional supply-build in Q1 2024.