Americas/EMEA base oils supply outlook: Week of 23 Sept

·        US base oils prices fall vs feedstock/competing fuel prices in response to lower outright prices, higher crude oil prices.

·        Base oils premium to feedstock/competing fuel prices stay high even after falling over past week.

·        High base oils premium implies tight supply, firm demand fundamentals.

·        Any disconnect between supply-demand fundamentals and high base oils premium could put pressure on further price adjustments.

·        Base oils price premium to feedstock/competing fuel prices already falls more sharply than in Europe and Asia, pointing to more of such a disconnect in US than in those other markets.

·        Lower-than-expected number of storms so far during Atlantic hurricane season raises prospect of larger-than-usual volume of surplus supply.

·        Another storm could form and move towards the Gulf of Mexico over the coming week.

·        Group II base oils supply surplus could be smaller than expected amid high shipments to Mexico during Q3 2024, combined with steady flows to markets like India.

·        Plant maintenance in Q4 2024 could also curb size of any surplus.

·        Increasingly firm Group I base oils prices relative to Group II base oils points to tight supply/strong demand fundamentals.

·        Lack of any posted price-cut for Group I base oils adds to signs of firm fundamentals.

·        Another cargo moves from US to northwest Europe in Sept 2024, likely adding to tighter Group I supply.

·        US Group III base oils supply set to get further boost, with South Korea’s exports to US climbing to eight-month high in Aug 2024.

·        Rise in shipments extends rebound in South Korea’s base oils exports to US in Q3 2024.

·        Rise in shipments could reflect moves to maintain or expand share of US’ Group III base oils market.

·        Shipments rise despite US’ weak supply-demand fundamentals and low Group III prices vs Group II and vs other regions.

·        Rise in shipments could incentivize some domestic refiners to revert to producing more Group II base oils. 

·        US continues to take attract larger-than-usual shipment volumes from Europe in Q3 2024.

·        Europe’s exports of almost 26,000 tonnes to US in June-July 2024 almost match exports of little more than 26,000 tonnes to US in Jan-July 2023.

·        Americas supply could get further boost from signs of ongoing arbitrage shipments from Asia.

·        Europe’s Group I base oils supply could be tighter than expected in the coming weeks following last week’s refinery fire in Greece.

·        Greece’s base oils exports to Europe almost double in H1 2023 from previous year, before rising further 10% in H1 2024, highlighting growing importance of country's supplies for regional market.

·        Europe’s Group II base oils supply shows signs of staying higher at start of Q3 2024.

·        Europe’s imports of base oils from key Group II sources rise in July 2024 to second-highest level in two years on strong pick-up in flows from US.

·        Rise in imports in July 2024 likely to coincide with steady regional Group II base oils output at higher levels.

·        Group II imports likely fell in Aug 2024 amid dip in exports from US.

·        Europe’s Group III base oils supply could tighten in Q4 2024 as scheduled plant maintenance work in the region cuts output.

·        Impact of the shutdown could be more muted after South Korea’s exports to Europe surge to three-year high in Aug 2024.

·        The shipments should help to partially cover for the drop in regional production.

·        Europe’s Group III base oils supply already stayed in a narrow range in July 2024 for fourth straight month.

·        Steady supply contrasts with pick-up in US Group III base oil imports in June-July 2024.

·        Shipments to US rise despite Group III prices at increasingly wide discount to Europe prices.

·        Overseas refiners’ focus on US suggests the market has additional attractions that compensate for lower price.

·        Repercussion is to prolong pressure on US Group III prices and to curb pressure on Europe Group III prices.

·        Supplies in Middle East set to get boost as South Korea’s exports to the region rise to five-month high in Aug 2024.

·        Rise in shipments replenishes stocks, gives buyers more leverage to hold off locking in additional supplies.

·        Saudi Arabia’s base oils exports from Yanbu and Jeddah stay higher in Aug 2024, with shipments showing signs of holding firm in Sept 2024.

·        Steady volumes at high levels provide increasingly key source for markets everywhere from the Mediterranean region to northwest Europe and from India to southeast Asia.

·        Dynamic could change when new base oils production capacity starts to come online in Asia-Pacific over coming year.