· Americas/Europe base oils supply could get support from firm margins that incentivize refiners to maintain or increase output.· US Group II domestic prices stay firm vs export prices, curbing pressure on refiners to adjust output.· Steady or higher supply would coincide with seasonal slowdown in demand.· Size of any supply overhang in early 2024 likely to impact prices and timing of revival in demand as buyers wait until any price adjustment has ended.· Lower US export prices raise prospect of curbing any additional flows from Asia-Pacific to the Americas region..· US Group III base oils supply-demand fundamentals could improve over the coming months as sustained slowdown in imports coincides with sliding Group III price premium to VGO.· US Group III premium to Group II base oils also narrows, cutting incentive for refiners to produce Group III base oils instead of Group II.· But Group III premium to Group II stays wider than in recent years, curbing the urgency of such a move..· US also faces prospect of arrival of swathe of Group III shipments from Asia in Dec 2023 amid signs arrival of some cargoes was delayed from Nov 2023..· Americas’ base oils output falls more steeply than regional demand in Sept 2023..· Trend, combined with sustained rise in US base oils exports, limits regional supply-build heading into Q4 2023..· US October base oils exports to Europe fall close to lowest level in eight months, extend trend of sliding flows to the region..· Sustained slowdown in shipments from US curbs build-up of surplus supplies in Europe.· Slowdown in shipments leaves Europe facing growing reliance on Group II base oils supplies originating from within the region..· Europe Group II premium to US domestic/export prices widens sharply in Q4 2023.· Trend boosts incentive for US refiners to move more supplies to Europe.· Europe’s Group II premium to fob Asia prices stays wider vs Q3 2023, but well below typical levels in 2021-2022.· Trend continues to curb prospect of repeat of wave of shipments from Asia to Europe/Africa in Q4 2022.· Trend adds further to Europe’s reliance on regional supplies to cover Group II requirements.· Spain’s exports of premium-grade base oils falls in Nov 2023 to two-year low..· Fall in supplies adds to contrasting fundamentals between relatively tighter availability of Group III supplies with OEM approvals and more plentiful availability of supplies with limited or no OEM approvals.· Widening premium of Europe’s Group III prices for supplies with OEM approvals over prices for supplies with limited approvals boosts incentive for blenders to use more lower-priced supplies instead..· Any subsequent slowdown in demand would coincide with signs of improving availability of OEM supplies in Dec 2023.· Trend could put pressure on prices for supplies with OEM approvals..· South Africa’s October base oils imports rise to highest in more than nine years..· Imports surge on resumption of flows from Netherlands.· Imports get further boost from arrival of large volumes from US, Saudi Arabia and Belgium.· Shipments from US surge from year-earlier levels, highlighting South Africa’s growing importance as outlet for US supplies.· Shipments from Saudi Arabia extend increasingly regular flow since Q2 2022.· Shipments from Belgium surge since July 2023, pointing to addition of new supplies.· Rise in flows from growing number of sources highlights South Africa’s total reliance on imports to cover its requirements.· Rise in flows highlights ready availability from those sources and the importance of South Africa as an outlet for the supplies. .Global base oils - week of Dec 18: Demand outlook.Global base oils - week of Dec 18 Price outlook - margins.Global base oils - week of Dec 18: Price outlook - arbitrage.Asia base oils - week of Dec 18: Supply outlook
· Americas/Europe base oils supply could get support from firm margins that incentivize refiners to maintain or increase output.· US Group II domestic prices stay firm vs export prices, curbing pressure on refiners to adjust output.· Steady or higher supply would coincide with seasonal slowdown in demand.· Size of any supply overhang in early 2024 likely to impact prices and timing of revival in demand as buyers wait until any price adjustment has ended.· Lower US export prices raise prospect of curbing any additional flows from Asia-Pacific to the Americas region..· US Group III base oils supply-demand fundamentals could improve over the coming months as sustained slowdown in imports coincides with sliding Group III price premium to VGO.· US Group III premium to Group II base oils also narrows, cutting incentive for refiners to produce Group III base oils instead of Group II.· But Group III premium to Group II stays wider than in recent years, curbing the urgency of such a move..· US also faces prospect of arrival of swathe of Group III shipments from Asia in Dec 2023 amid signs arrival of some cargoes was delayed from Nov 2023..· Americas’ base oils output falls more steeply than regional demand in Sept 2023..· Trend, combined with sustained rise in US base oils exports, limits regional supply-build heading into Q4 2023..· US October base oils exports to Europe fall close to lowest level in eight months, extend trend of sliding flows to the region..· Sustained slowdown in shipments from US curbs build-up of surplus supplies in Europe.· Slowdown in shipments leaves Europe facing growing reliance on Group II base oils supplies originating from within the region..· Europe Group II premium to US domestic/export prices widens sharply in Q4 2023.· Trend boosts incentive for US refiners to move more supplies to Europe.· Europe’s Group II premium to fob Asia prices stays wider vs Q3 2023, but well below typical levels in 2021-2022.· Trend continues to curb prospect of repeat of wave of shipments from Asia to Europe/Africa in Q4 2022.· Trend adds further to Europe’s reliance on regional supplies to cover Group II requirements.· Spain’s exports of premium-grade base oils falls in Nov 2023 to two-year low..· Fall in supplies adds to contrasting fundamentals between relatively tighter availability of Group III supplies with OEM approvals and more plentiful availability of supplies with limited or no OEM approvals.· Widening premium of Europe’s Group III prices for supplies with OEM approvals over prices for supplies with limited approvals boosts incentive for blenders to use more lower-priced supplies instead..· Any subsequent slowdown in demand would coincide with signs of improving availability of OEM supplies in Dec 2023.· Trend could put pressure on prices for supplies with OEM approvals..· South Africa’s October base oils imports rise to highest in more than nine years..· Imports surge on resumption of flows from Netherlands.· Imports get further boost from arrival of large volumes from US, Saudi Arabia and Belgium.· Shipments from US surge from year-earlier levels, highlighting South Africa’s growing importance as outlet for US supplies.· Shipments from Saudi Arabia extend increasingly regular flow since Q2 2022.· Shipments from Belgium surge since July 2023, pointing to addition of new supplies.· Rise in flows from growing number of sources highlights South Africa’s total reliance on imports to cover its requirements.· Rise in flows highlights ready availability from those sources and the importance of South Africa as an outlet for the supplies. .Global base oils - week of Dec 18: Demand outlook.Global base oils - week of Dec 18 Price outlook - margins.Global base oils - week of Dec 18: Price outlook - arbitrage.Asia base oils - week of Dec 18: Supply outlook