· US base oils prices extend fall versus feedstock/competing fuel prices.· Lower margins, and higher diesel premium to crude oil, boost incentive for refiners to produce more motor fuels instead of base oils.· Supply could also face pressure from cold weather in early 2025.· Freezing weather in US Gulf coast area impacted US refinery run-rates in early 2024.· Lack of price response to falling base oils margins points to still-weak supply-demand fundamentals.· Weak fundamentals keep pressure on refiners to maintain high exports.· Any upward adjustment in export prices relative to domestic prices would point to signs of easing surplus.· Refiners’ more limited ability to influence US base oils imports adds to importance of exports to manage supply balance.· US base oils imports shows signs of falling in Dec 2024 before rising again in Jan 2025.· Base oils imports in Jan 2025 so far show signs of exceeding typical volumes but lagging surge in shipments in Sept 2024 and Nov 2024.· Lower imports would curb upward pressure from overseas shipments on US base oils supplies at start of the year..· South Korea’s base oils exports to US fall to six-month low in Dec 2024..· Drop in shipments adds to signs of more muted impact of US imports on country’s domestic supply early this year..· Lower imports early this year would help cushion against impact of rise in base oils imports in Nov 2024 to second-highest level in more than two years..· Surge in imports in H2 2024 partially reverses impact of rise in US base oils exports, raising prospect of larger supply-build at year-end.· Imports surge despite weak domestic US Group III prices and seasonal slowdown in demand.· Surge in imports, despite unattractive fundamentals and prices, highlights US refiners’ more limited leverage over that aspect of US base oils supply.· Dynamic could incentivize US refiners to trim output of Group III base oils, whose production they have more control over.· Rise in imports in H2 2024 raises prospect of US market starting 2025 with Group III base oils accounting for larger-than usual share of domestic supply, and Group II base oils accounting for lower than usual share..· Dynamic could add to incentive for US refiners to focus on producing more Group II base oils instead of Group III base oils..· Any resumption of normal shipping flows via Suez Canal would speed up base oils shipments from Asia and Middle East to Europe and US.· Scenario would have largest benefit on Group III base oils shipments from Asia and Middle East.· Scenario would also facilitate shipments from Europe to markets like East Africa and Asia..· Europe’s Group I base oils supply surplus shows signs of staying tighter than usual for time of year.· Italy’s base oils output recovers in Nov 2024, cushioning impact of impact of plant maintenance in Spain in Nov-Dec 2024..· Italy’s base oils stocks still fall in Nov 2024 for fifteenth month from year-earlier levels.· Lower stocks curb need to clear surplus volumes.· Another large cargo of Group I base oils moves from northwest Europe to southeast Asia in H1 Jan 2025, adding to several other shipments from Europe in late-2024.· Shipments tighten supply further..· Europe’s Group II base oils market could face smaller surplus at start of this year after region’s imports fall to nine-month low in Nov 2024..· Drop in shipments from overseas markets leaves Europe more reliant on supplies from regional sources..· Europe’s Group III base oils supply likely to be readily available at start of this year after surge in supply in Nov 2024..· Supply rises in Nov 2024 despite plant maintenance work in Spain that month.· Supply likely to last longer than usual amid seasonal slowdown in base oils and lube demand at year-end.· Supply of premium-grade base oils from Spain to northwest Europe stays lower than usual so far in Jan 2025, extending drop in supply throughout Q4 2024.· Dynamic points to healthy availability of supplies with some OEM approvals, and still-tighter availability of supplies with full set of approvals..Americas/EMEA base oils demand outlook: Week of 20 Jan.Asia base oils supply outlook: Week of 20 Jan.Global base oils arb outlook: Week of 20 Jan.Global base oils margins outlook: Week of 20 Jan.S Korea Dec exports to Americas mixed.US’ November base oils imports rise.Europe’s Nov Group III supply rises
· US base oils prices extend fall versus feedstock/competing fuel prices.· Lower margins, and higher diesel premium to crude oil, boost incentive for refiners to produce more motor fuels instead of base oils.· Supply could also face pressure from cold weather in early 2025.· Freezing weather in US Gulf coast area impacted US refinery run-rates in early 2024.· Lack of price response to falling base oils margins points to still-weak supply-demand fundamentals.· Weak fundamentals keep pressure on refiners to maintain high exports.· Any upward adjustment in export prices relative to domestic prices would point to signs of easing surplus.· Refiners’ more limited ability to influence US base oils imports adds to importance of exports to manage supply balance.· US base oils imports shows signs of falling in Dec 2024 before rising again in Jan 2025.· Base oils imports in Jan 2025 so far show signs of exceeding typical volumes but lagging surge in shipments in Sept 2024 and Nov 2024.· Lower imports would curb upward pressure from overseas shipments on US base oils supplies at start of the year..· South Korea’s base oils exports to US fall to six-month low in Dec 2024..· Drop in shipments adds to signs of more muted impact of US imports on country’s domestic supply early this year..· Lower imports early this year would help cushion against impact of rise in base oils imports in Nov 2024 to second-highest level in more than two years..· Surge in imports in H2 2024 partially reverses impact of rise in US base oils exports, raising prospect of larger supply-build at year-end.· Imports surge despite weak domestic US Group III prices and seasonal slowdown in demand.· Surge in imports, despite unattractive fundamentals and prices, highlights US refiners’ more limited leverage over that aspect of US base oils supply.· Dynamic could incentivize US refiners to trim output of Group III base oils, whose production they have more control over.· Rise in imports in H2 2024 raises prospect of US market starting 2025 with Group III base oils accounting for larger-than usual share of domestic supply, and Group II base oils accounting for lower than usual share..· Dynamic could add to incentive for US refiners to focus on producing more Group II base oils instead of Group III base oils..· Any resumption of normal shipping flows via Suez Canal would speed up base oils shipments from Asia and Middle East to Europe and US.· Scenario would have largest benefit on Group III base oils shipments from Asia and Middle East.· Scenario would also facilitate shipments from Europe to markets like East Africa and Asia..· Europe’s Group I base oils supply surplus shows signs of staying tighter than usual for time of year.· Italy’s base oils output recovers in Nov 2024, cushioning impact of impact of plant maintenance in Spain in Nov-Dec 2024..· Italy’s base oils stocks still fall in Nov 2024 for fifteenth month from year-earlier levels.· Lower stocks curb need to clear surplus volumes.· Another large cargo of Group I base oils moves from northwest Europe to southeast Asia in H1 Jan 2025, adding to several other shipments from Europe in late-2024.· Shipments tighten supply further..· Europe’s Group II base oils market could face smaller surplus at start of this year after region’s imports fall to nine-month low in Nov 2024..· Drop in shipments from overseas markets leaves Europe more reliant on supplies from regional sources..· Europe’s Group III base oils supply likely to be readily available at start of this year after surge in supply in Nov 2024..· Supply rises in Nov 2024 despite plant maintenance work in Spain that month.· Supply likely to last longer than usual amid seasonal slowdown in base oils and lube demand at year-end.· Supply of premium-grade base oils from Spain to northwest Europe stays lower than usual so far in Jan 2025, extending drop in supply throughout Q4 2024.· Dynamic points to healthy availability of supplies with some OEM approvals, and still-tighter availability of supplies with full set of approvals..Americas/EMEA base oils demand outlook: Week of 20 Jan.Asia base oils supply outlook: Week of 20 Jan.Global base oils arb outlook: Week of 20 Jan.Global base oils margins outlook: Week of 20 Jan.S Korea Dec exports to Americas mixed.US’ November base oils imports rise.Europe’s Nov Group III supply rises
