· US base oils supply surplus likely to linger, even if at lower levels than in Q1 2024.· Persistent surplus likely to linger amid steady output despite weak margins and amid signs of weaker-than-usual seasonal pick-up in demand.· Several unusually large cargoes load from US Gulf coast in late March 2024 and in April 2024, likely bound for markets like India.· Shipments point to surplus supply in US extending into Q2 2024.· Shipments likely help to ease surplus at start of Q2 2024; they also point to the need to maintain arbitrage opportunities to avoid a supply-build.· US Group II export prices maintain steep discount to prices in markets like Europe even after recent price recovery.· Trend gives suppliers the option of clearing more surplus volumes with relative ease..· US’ February base oils exports mostly fall from Jan 2024 to regular outlets like Latin America and Europe, and instead rise to less regular outlets like West Africa and Middle East..· Trend points to wave of less regular arbitrage shipments and those regions’ ability to absorb such supplies more easily.· Trend could reflect Europe’s greater reliance on term volumes rather than spot supplies from the US.· Trend could also reflect reluctance of buyers or trading firms in Europe to procure and hold spot volumes without first lining up buyers for the supplies..· South Korea’s base oils exports to US fall in Q1 2024 to lowest in three years..· Slowdown shows signs of extending into start of Q2 2024.· Recent slide in US Group III base oils prices adds to attraction of cutting shipments to US, moving more supplies to other markets.· That trend could extend to overseas suppliers in the Middle East..· Europe’s firm Group I export prices relative to domestic prices reflect tighter surplus supply in the region.· Surplus supply shows signs of already being tighter than usual in Q1 2024 even as Europe’s base oils exports to markets outside the region rise strongly in first two months of 2024 vs late-2023..· Base oils exports still fall in Feb 2024 for a third month from year-earlier levels, reflecting smaller surplus compared with same time in early 2023..· Europe’s Group II base oils market likely to be more self-sufficient in Q2 2024 following completion of plant-maintenance in the Netherlands.· Falling Group II base oils premium to VGO cuts incentive to raise regional base oils output.· Lower US Group II premium to Europe prices erodes attraction of moving more shipments to Europe.· Dip in Europe’s base oils imports from US in Feb 2024 coincided with start of maintenance work, raising prospect of tighter Group II supply in Europe through most of Q1 2024.· Singapore takes delivery last week of a shipment from the Netherlands, suggesting the cargo set off at least a month earlier, when plant maintenance work was still taking place..· Europe’s Group III base oils market set to see slowdown in supplies from Finland because of plant maintenance work during Q2 2024.· Group III supply could still get a boost from pick-up in arbitrage shipments in coming months after recent slide in US prices cuts attraction of moving cargoes to that market.· Europe’s February Group III base oils supply stays lower than usual amid sustained slide in shipments from Mideast Gulf..· Slowdown in shipments from Middle East coincides with US Group III prices maintaining steep premium to Europe Group III prices.· Recent reversal of that price-trend could trigger revival in shipments from Middle East to Europe..· South Korea’s base oils exports to Europe rise in Q1 2024 to highest since Q3 2022, contrasting with and helping to cushion impact of slide in shipments to US.· Rising shipments help to boost Europe’s lower Group III base oils supply in first two months of 2024.· Rising shipments partially cover for slowdown in Group III supplies from Middle East, and the UAE especially.· Any subsequent recovery in shipments from Middle East to Europe could leave the market well supplied..· Signs of more regular shipments from Saudi Arabia via the Red Sea market raise prospect of boosting supply in markets like UAE and India.· Trend could curb urgency for buyers in those markets to line up alternative supplies from other sources..Americas/EMEA base oils demand outlook: Week of 22 April.Asia base oils supply outlook: Week of 22 April.Global base oils margins outlook: Week of 22 April.Global base oils arb outlook: Week of 22 April.Base Oil News stories and analysis also available on ICIS platform
