· US base oils prices trend lower relative to feedstock and competing fuel prices.· Lower margins and earlier fall in outright prices compared with H2 2023 could help to limit size of supply-build at year-end.· Lower prices facilitate higher export volumes and removal of surplus Group I and Group II base oils supplies through arbitrage shipments to markets like Africa.· Another cargo of US origin, likely of Group I base oils, is set to reach Nigeria in coming week after loading from US in H2 Oct 2024..· US base oils and lube exports stay at more elevated levels in Sept 2024 even as they fall from previous month..· Firm export volumes balance out impact of weak domestic demand, partially cushion impact of surge in imports to two-year high in Sept 2024..· Imports surge despite unusually weak US Group III prices relative to Europe and Asia.· High base oils imports raise prospect of leaving supply outpacing demand at end-Q3 2024.· Plant maintenance work in Oct 2024 should partially reverse that trend at start of Q4 2024.· Completion of plant maintenance work and signs of another wave of base oils imports in Nov 2024 put pressure on exports staying at elevated levels this month to limit supply-build.· Steady fall in US export prices in recent months facilitates prospect of higher shipment volumes.· Even so, seasonal slowdown in demand in key outlets like Latin America and Europe could deter buyers in those markets..· Latin America’s base oils supply could be more balanced at start of Q4 2024 after slump in US exports to the region in Sept 2024..· Any extension of that slowdown in shipments would help to limit likely supply-build in region in Q4 2024..· Brazil’s base oils market likely to begin Q4 2024 with larger stocks after country’s surplus of supply over demand jumps to eight-month high in Sept 2024..· Lack of plant maintenance work in Brazil in Q4 2024 would compound impact of any sustained rise in surplus supplies.· Country’s supply surplus instead likely to fall in Oct 2024 after US exports to Brazil fall to seventeen-month low in Sept 2024..· Lower surplus would spur earlier revival in demand ahead of likely pick-up in lube consumption in Q1 2025..· Europe’s Group I base oils supply surplus likely to be smaller in Q4 2024 than same time a year ago amid plant maintenance and drop in production capacity.· Italy’s Group I base oils output falls to ten-month low in Sept 2024, lags year-earlier levels for first time in four months..· Italy’s base oils output rose strongly in late 2023, boosting Europe’s surplus supply at year-end and in early 2024.· Lower production capacity this year likely to prevent repeat of that scenario in final months of 2024.· Any need for Europe refiners to clear surplus Group I supplies in export market faces signs of growing competition from other sources like US and Russia.· Wave of shipments set to reach Nigeria in Nov 2024 include Group I supplies from at least some of those sources..· Europe’s Group II base oils supply likely to remain readily available amid steady regional output and plentiful imports from US.· US base oils exports to Europe rise in Sept 2024 to second-highest level this year..· Jump in shipments likely to boost Europe’s Group II base oils supply at start of Q4 2024.· Europe’s Group II base oils price premium to US export prices widens further in recent weeks..· Widening premium sustains incentive for US suppliers to move more shipments to Europe.· Any such flows, in combination with firm regional base oils output, increase prospect of supply outpacing demand in Q4 2024..· Europe’s supply of Group III base oils with full set of OEM approvals could be tighter amid prolonged pause in shipments of premium-grade base oils from Spain to northwest Europe.· That pause shows signs of ending, with large cargo loading from Spain at start of this week.· Premium of Europe Group III 4cSt high price over Group III 4cSt low price widens to multi-year high in Nov 2024..· Widening price-gap points to tighter availability of Group III supplies with full set of OEM approvals and growing availability of other supplies.· Widening price gap adds to incentive for blenders to maximise consumption of base oils without full set of OEM approvals.· Prospect of recovery in supplies with full set of OEM approvals over coming weeks could put additional pressure on unusually wide price-gap..Americas/EMEA base oils demand outlook: Week of 18 Nov.Global base oils margins outlook: Week of 18 Nov.Global base oils arb outlook: Week of 18 Nov.Asia base oils supply outlook: Week of 18 Nov.US Sept base oils exports to Europe rise.US September base oil/lube exports fall.US’ September base oils imports surge.Brazil Sept base oils supply outpaces demand.Base Oil News stories and analysis also available on ICIS platform
