Americas/EMEA base oils supply outlook: Week of 16 Dec

·         US base oils prices hold steady versus feedstock/diesel prices at time of year when they usually face more downward pressure.

·         Steadier base oils values in recent weeks curb pressure on refiners to trim output at time of year when demand faces seasonal slowdown.

·         Steadier output would increase risk of build-up of surplus supplies.

·         Steadier output could also point to signs of more manageable supplies at year-end.

·         Scheduled and unexpected plant maintenance work in Q4 2024, combined with firm export volumes, likely slow pace of supply-build at year-end.

·         Signs of dip in base oils imports in Dec 2024 could curb further size of supply-build.

·         US base oils/lube exports stay unusually high in Oct 2024 despite plant maintenance during the month.

·         Rise in exports and likely drop in domestic base oils output likely cuts US’ surplus supply in early-Q4 2024.

·         Any signs of more balanced supply would curb pressure on refiners to trim prices or production levels.

·         Rise in exports points to preference to maintain rather than cut output, and to move surplus volumes to overseas markets even if at discounted prices.

·         US base oils exports rise strongly to markets like South America and Africa in Oct 2024, fall to Europe.

·         Trend points to moves to clear surplus cargoes at discounted prices through other outlets.

·         Trend curbs prospect of Europe facing large supply-build and downward pressure on prices in response.

·         US refiners’ ability to clear surplus supplies through export markets contrasts with more limited leverage to control country’s base oils imports.

·         US base oils imports could be more volatile in Q4 2024, with shipments in Dec 2024 so far lagging a likely jump in imports in Nov 2024.

·         Any rebound in shipments in Nov 2024 follows dip in imports in Oct 2024.

·         Dynamic highlights role of base oils imports as key determinant for size of any build-up of surplus supplies in US at year-end.

·         Dynamic also suggests Group III base oils likely to consist of larger share of any large build-up of supplies.

·         Europe’s base oils supply-build could be smaller than usual at year-end and start of next year.

·         Volume of Group I supply that sellers need to clear through overseas markets could be smaller than usual at end-2024, with Italy’s output falling to sixteen-month low in Oct 2024.

·         Italy is typically key source of Europe’s surplus Group I base oils supplies to clear at year-end, especially for brightstock.

·         Slump in Italy's output and stocks instead likely to curb volume of such surplus supplies this year.

·         Europe’s Group I brightstock prices strengthen versus VGO, versus SN 500 and versus export prices in Q4 2024.

·         Brightstock price-strength points to tighter-than-usual availability of the grade at year-end.

·         Europe’s Group II base oils supply could slip in Q4 2024 amid signs of slowdown in US shipments to the region.

·         US base oils exports to Europe fall to twenty-two month low in Oct 2024.

·         Dip in shipments likely reflects impact of plant maintenance in US in Oct 2024.

·         Dip in shipments raises prospect of drop in Europe’s Group II supplies from US in Q4 2024.

·         Drop in Group II supplies would cushion impact of seasonal slowdown in demand in Q4 2024.

·         Smaller supply-build in Q4 2024 would ease downward price-pressure at year-end and in early 2025.

·         Europe Group II price premium to US export prices steadies over past month at lower levels than same time last year.

·         Lower price premium curbs attraction of moving arbitrage shipments to Europe.

·         Any such trend could limit further size of any build-up of Group II supplies at end-2024/early 2025.

·         Europe’s supply of Group III base oils with full set of OEM approvals likely to get boost from pick-up in shipments from Spain in recent and coming weeks.

·         Supply likely to get further boost from rise in shipments from Indonesia to Europe in Oct 2024 to highest level in more than five years.

·         Rise in Group III base oils exports balances out pause in shipments from Indonesia to Europe in Sept 2024, adds to recovery in regional supply at year-end.