· US Group II export prices improve relative to competing fuel/feedstock prices after a sustained fall since Nov 2023.· Export prices remain unusually weak versus competing fuel/feedstock prices, maintaining incentive for refiners to redirect light-grade supplies back into the diesel pool.· Higher export prices suggest that surplus supply has tightened either because of a change in output, or firmer demand, or more balanced supply following a wave of arbitrage shipments to overseas markets in Q1 2024. · Tighter surplus supply could also reflect moves by refiners to hold onto supplies rather than sell at steep discounts.· Any such moves to hold back supplies would raise risk of build-up of surplus volumes if demand fails to rise strongly.· US domestic Group II price premium to export prices narrows but is still unusually wide.· Wide premium curbs pressure on refiners to trim output..· Europe’s unusually weak domestic Group I base oils premium to VGO incentivizes refiners to cut production.· Europe’s firming export prices relative to domestic prices point to tighter availability of surplus Group I base oils supply in the region.· Signs of lower regional Group I base oils output in Jan 2024 would add to tightening availability of supply in Q1 2024 and cushion impact of seasonal slowdown in demand at start of the year.· Tighter Group I supply raises prospect of limiting additional arbitrage shipments from sources like Greece to outlets like Singapore over the coming months.· Italy’s base oils stocks fall to seventeen-month low in Jan 2024 as output falls and demand rises..· Italy’s base oils output and stocks fall ahead of planned closure of one of the country’s Group I base oils units.· Lower stocks could speed up impact of closure of Group I base oils unit and force domestic and overseas buyers to turn to other sources more quickly to cover requirements.· Lower stocks and planned plant closure also likely to curb availability of Group I shipments from southern Europe to move to Asia.· Europe’s premium of Group II base oils over US prices narrows sharply, curbing profitability of moving more US arbitrage shipments to Europe.· Any increase in Europe’s Group II prices relative to US prices over the coming weeks would point to ongoing requirements for additional US shipments to top up Europe’s Group II supply.· Europe’s Group II price premium to FOB NE Asia prices continues to narrow, adding to region's reliance on US market for any requirements for additional supplies.· Europe’s Group III prices continue to weaken vs feedstock prices, boosting incentive for refiners to cut production or move more supplies to other markets.· Flow of premium-grade base oils from Spain to northwest Europe shows signs of slowing in March 2024 from previous month.· Slowdown precedes start of planned refinery maintenance work in Finland in Q2 2024.· Flow of premium-grade base oils from the UAE to Europe shows signs of staying lower than usual through Q4 2023 and so far this year..· Europe’s surplus of base oils output over regional demand rebounds in Dec 2023..· Size of surplus lags surplus in month of December in each of the previous four years.· Size of surplus in Q4 2023 also lags fourth-quarter surplus in each of the previous four years.· Trend suggests Europe started 2024 with surplus supplies that required clearing.· But size of surplus was smaller than usual..· Global Group III base oils imports from Mideast Gulf fall to six-month low in Jan 2024 even as US imports from the region rise to four-month high..· Diverging trends highlight attraction of US market where Group III prices maintain a steep premium to prices in other regions.· Several more shipments from UAE reach or set to reach US in March 2024 and April 2024, pointing to extension of the trend.· Extension of trend could deter shipments from Asia from moving to US in order to avoid rising surplus in that market.· Extension of trend could leave Europe more reliant on supplies from other sources to cover its Group III requirements..· Global base oils exports to Kenya rise to five-month high in Jan 2024 on recovery in shipments from Europe..· Europe’s falling production capacity and its unusually large share of Kenya’s base oils imports make the East African country an attractive outlet for refiners in markets where production is expanding, such as Saudi Arabia and India..Americas/EMEA base oils demand outlook: Week of April 1.Asia base oils supply outlook: Week of April 1.Global base oils margins outlook - week of April 1.Global base oil cargo flows - week of April 1
· US Group II export prices improve relative to competing fuel/feedstock prices after a sustained fall since Nov 2023.· Export prices remain unusually weak versus competing fuel/feedstock prices, maintaining incentive for refiners to redirect light-grade supplies back into the diesel pool.· Higher export prices suggest that surplus supply has tightened either because of a change in output, or firmer demand, or more balanced supply following a wave of arbitrage shipments to overseas markets in Q1 2024. · Tighter surplus supply could also reflect moves by refiners to hold onto supplies rather than sell at steep discounts.· Any such moves to hold back supplies would raise risk of build-up of surplus volumes if demand fails to rise strongly.· US domestic Group II price premium to export prices narrows but is still unusually wide.· Wide premium curbs pressure on refiners to trim output..· Europe’s unusually weak domestic Group I base oils premium to VGO incentivizes refiners to cut production.· Europe’s firming export prices relative to domestic prices point to tighter availability of surplus Group I base oils supply in the region.· Signs of lower regional Group I base oils output in Jan 2024 would add to tightening availability of supply in Q1 2024 and cushion impact of seasonal slowdown in demand at start of the year.· Tighter Group I supply raises prospect of limiting additional arbitrage shipments from sources like Greece to outlets like Singapore over the coming months.· Italy’s base oils stocks fall to seventeen-month low in Jan 2024 as output falls and demand rises..· Italy’s base oils output and stocks fall ahead of planned closure of one of the country’s Group I base oils units.· Lower stocks could speed up impact of closure of Group I base oils unit and force domestic and overseas buyers to turn to other sources more quickly to cover requirements.· Lower stocks and planned plant closure also likely to curb availability of Group I shipments from southern Europe to move to Asia.· Europe’s premium of Group II base oils over US prices narrows sharply, curbing profitability of moving more US arbitrage shipments to Europe.· Any increase in Europe’s Group II prices relative to US prices over the coming weeks would point to ongoing requirements for additional US shipments to top up Europe’s Group II supply.· Europe’s Group II price premium to FOB NE Asia prices continues to narrow, adding to region's reliance on US market for any requirements for additional supplies.· Europe’s Group III prices continue to weaken vs feedstock prices, boosting incentive for refiners to cut production or move more supplies to other markets.· Flow of premium-grade base oils from Spain to northwest Europe shows signs of slowing in March 2024 from previous month.· Slowdown precedes start of planned refinery maintenance work in Finland in Q2 2024.· Flow of premium-grade base oils from the UAE to Europe shows signs of staying lower than usual through Q4 2023 and so far this year..· Europe’s surplus of base oils output over regional demand rebounds in Dec 2023..· Size of surplus lags surplus in month of December in each of the previous four years.· Size of surplus in Q4 2023 also lags fourth-quarter surplus in each of the previous four years.· Trend suggests Europe started 2024 with surplus supplies that required clearing.· But size of surplus was smaller than usual..· Global Group III base oils imports from Mideast Gulf fall to six-month low in Jan 2024 even as US imports from the region rise to four-month high..· Diverging trends highlight attraction of US market where Group III prices maintain a steep premium to prices in other regions.· Several more shipments from UAE reach or set to reach US in March 2024 and April 2024, pointing to extension of the trend.· Extension of trend could deter shipments from Asia from moving to US in order to avoid rising surplus in that market.· Extension of trend could leave Europe more reliant on supplies from other sources to cover its Group III requirements..· Global base oils exports to Kenya rise to five-month high in Jan 2024 on recovery in shipments from Europe..· Europe’s falling production capacity and its unusually large share of Kenya’s base oils imports make the East African country an attractive outlet for refiners in markets where production is expanding, such as Saudi Arabia and India..Americas/EMEA base oils demand outlook: Week of April 1.Asia base oils supply outlook: Week of April 1.Global base oils margins outlook - week of April 1.Global base oil cargo flows - week of April 1
