· US base oils margins fall as crude and heating oil prices surge.· Margins had previously been trending lower slowly.· Steady-to-lower margins coincided with muted domestic demand and improving supply fundamentals following completion of most plant maintenance work.· Sharper fall in margins in recent days reflects volatility of crude/heating oil prices rather than any marked change in supply-demand fundamentals.· Even so, any sustained drop in margins could put pressure on refiners to adjust production or prices.· Any such moves would change supply-demand fundamentals from their previous trend.· That trend pointed to gradual improvement in supply after fundamentals tightened at start of Q2 2025 because of plant maintenance work and seasonal rise in domestic demand.· US base oils/lube exports fall to seven-month low in April 2025, reflecting the tighter fundamentals at start of Q2 2025.· Exports fall to key outlets that had been absorbing large volumes of spot supplies, such as Mexico and India..· Exports hold firm to key outlets of term supplies, such as South America and Europe..· Dynamic points to healthy export volumes even during round of plant-maintenance work and seasonal rise in domestic demand.· Dynamic suggests exports to markets like Mexico, India and Africa are likely to rebound as domestic supply recovers and demand wanes during summer months.· Prospect of rise in surplus supplies to markets like Mexico and India increases importance of prices holding at levels that keep open the arbitrage to those markets..· Europe’s Group I base oils supply could start to improve as more plant maintenance work draws to a close after round of shutdowns during H1 2025.· Supply could get further boost if unusual surge in Turkey’s base oils output were to continue through Q2 2025.· Turkey’s base oils output rises in March 2025 to highest in more than a decade, contrasts with pause in output during previous three months..· Any extended rise in output would facilitate pick-up in shipments to Europe, whose base oils imports from Turkey already surged in recent years..· Europe’s Group I base oils supply holds steady in Q1 2025 vs year-earlier levels.· Supply holds steady as fall in exports and higher output from UK cushions impact of slump in output in Italy because of plant-maintenance work..· Dynamic suggests Europe’s Group I production remains sufficient to cover regional requirements.· Dynamic highlights how exports face biggest impact from drop in Europe’s Group I production capacity.· Group I base oils exports to markets outside Europe fall in Q1 2025 to lowest level for first quarter of the year in at least five years..· Europe’s Group II base oils prices rise more strongly vs VGO and vs US prices in Q2 2025 vs Q2 2024, despite higher supply vs year-earlier levels..· Stronger Group II price differentials, despite higher supply, point to other factors supporting firmer price levels.· Dynamic could reflect additional interest in Group II heavy grades especially in response to tighter availability of Group I supplies.· Dynamic could reflect more balanced Group II supplies in Q2 2025 after drop in supply in Q1 from previous quarter limits supply-build during winter months..· Europe’s Group II supply likely to remain readily available throughout Q2 2025 amid firm regional output and sustained flows from US.· US base oils exports to Europe rise to seven-month high in April 2025..· Exports stay high despite fall in US’ total base oils and lube exports in April 2025.· Firm US exports highlight focus of prioritising markets like Europe and South America and using other outlets to clear any surplus volumes..· Possibility of disruption to base oils supply in Middle East could prompt buyers to seek supplies from other sources instead.· Dynamic could support firmer buying interest for Group I heavy neutrals and Group III base oils from other regions..Americas/EMEA base oils demand outlook: Week of 16 June.Global base oils margins outlook: Week of 16 June.Global base oils arb outlook: Week of 16 June.Global base oils cargo flows: Week of 16 June.US’ April base oils/lube exports fall.UK’s March base oils output rises.Netherlands’ March base oils output stays lower.Asia base oils supply outlook: Week of 16 June
