· US base oils prices stay unusually high vs feedstock/competing fuel prices, contrast with weak diesel crack spreads.· Trend incentivizes refiners to maximise base oils output.· Base oils supply could get further support from more muted demand as buyers and distributors focus on consuming or clearing stocks that they built up as cover against supply disruptions during hurricane season..· Build-up of surplus US base oils supplies during Q3 2024 could be lower than expected following recent pick-up in shipments to markets like West Africa and India.· Those shipments follow surge in base oils and lube exports to Mexico earlier in Q3 2024, cushioning slowdown in exports to other markets at that time.· US base oils exports fall to 19-month low in July 2024, while lube exports hold steady, reflecting that dynamic..· Fall in total exports coincides with closed arbitrage to overseas markets as domestic market focuses on building stocks.· Rise in exports to Mexico suggests surplus supply remained sufficient even with those moves to build stocks.· Already-high export volumes to Mexico could limit that market’s ability to absorb much larger volumes.· Dynamic could put pressure on arbitrage to open to other markets if US has additional supplies that it needs to clear over coming months.· Recent shipments to India and West Africa point to prices at levels that were competitive enough to attract sufficient demand in those markets..· US Group III base oils supply could stay more plentiful even as high Group II prices relative to Group III incentivize US refiners to produce more Group II base oils.· Even with such a move, US Group III supply could stay more plentiful amid signs of growing competition between key overseas suppliers to maintain or increase their share of US Group III market.· US base oils imports from South Korea rise in July 2024 to highest in more than four years, boosting country's share of US Group III imports to close to 50% of the total..· Rebound in imports from South Korea and its share of market supply follows rise in US imports of Group III base oils from Middle East over past year, despite fall in total US Group III imports.· Dynamic raises prospect of rising competition for Group III market share between refiners in South Korea, in Middle East and in US domestic market..· Europe’s Group I base oils supply could be more plentiful than expected amid signs of steady output in early Q3 2024.· Steady flow of shipments from overseas markets to Europe supplement the regional supply.· Dynamic raises prospect of leaving the market with sufficient supplies to cover seasonal pick-up in demand in late-Q3 2024.· Italy’s Group I base oils output holds steady in July 2024 and stays in narrow range since start of this year and throughout most of past year..· Steady output and Italy’s rising exports to markets in Europe support region’s firm Group I supply so far this year, especially relative to Group II and Group III base oils supply..· Europe’s Group I base oils supply gets additional boost from increasingly frequent shipments from other sources to the region.· US Group I exports to Europe rise to multi-year high in July 2024, reflecting that trend..· Steady output in markets like Italy and ongoing shipments of additional Group I cargoes to Europe at start of Q3 2024 raise prospect of leaving the market with sufficient supplies to cover seasonal pick-up in demand at end of the quarter..· Prospect of higher Group II base oils supply in Europe in H2 2024 could also curb blenders’ need for more Group I base oils supplies over the coming months.· Europe’s Group II supply likely to extend recovery in Q3 2024 as higher regional output coincides with seasonal dip in demand.· Europe’s Group II supply could still avoid significant surplus in Q3 2024 amid slowdown in US shipments to the region in July 2024..· Slowdown in US shipments shows signs of extending into Aug 2024.· That dynamic could soon reverse as widening discount of US Group II prices to Europe prices and prospect of pick-up in surplus US supplies boosts attraction of moving more supplies to Europe..· Europe’s Group III base oils prices maintain steep premium to prices in US and Asia.· Steep Group III premium incentivizes overseas suppliers to move more shipments to Europe.· Any such flows would help to cushion impact of planned shutdown of regional Group III unit for maintenance work.· Planned maintenance work set to have largest impact on base oils supplies with full set of OEM approvals.· Drop in supply would require supplementary volumes from Asia-Pacific, which show signs of materialising.· Base oils flows to Nigeria shows signs of rising, with growing number of shipments from US and Europe set to reach the West African country this and next month..Americas/EMEA base oils demand outlook: Week of 16 Sept.Asia base oils supply outlook: Week of 16 Sept.Global base oils margins outlook: Week of 16 Sept.Global base oils cargo flows: Week of 16 Sept.US July base oils exports fall.US’ July base oils exports to Europe fall.Italy’s July base oils output holds steady
