· US base oils premium to feedstock/heating oil prices stays high even after recent dip.· Firm base oils premium likely to sustain incentive for refiners to maximise base oils output.· Supply could get further support from less workable arbitrage to overseas outlets, complicating removal of any surplus volumes.· Supply could get further support from more feasible arbitrage to move Group II shipments from Asia to US, especially for heavy grades.· Supply could get further support from typical seasonal slowdown in US domestic demand in months of July and August..· Tighter surplus supply of light-grade base oils in US in Q2 2024 likely to impact flows to Mexico the most, with minimal impact on markets like India.· India’s imports of Group II base oils from US consist mostly of mid-viscosity grades rather than light-grade base oils..· Closed arbitrage to India, and that country’s role as key outlet for surplus mid-viscosity grades, could instead complicate removal of those supplies from US market..· South Korea’s May base oils exports to US rise to five-month high, but extend slump from year-earlier levels for fifth month..· Fall in shipments contrasts with rise in South Korea’s base oils exports to Europe in May 2024 for second time in three months to 13-month high.· Diverging trends point to increased focus on European market, raising prospect of South Korea’s exports to US staying lower.· South Korea’s May exports to US set to boost US Group III supply in H1 July 2024..· Europe’s tight Group I supply curbs availability for export to markets outside the region.· Exports from key Group I producers in Europe fall in April 2024 for fifth time in six months from year-earlier levels..· Fall in exports contrasts with rise in Europe’s total base oils exports to non-EU markets in April 2024.· Europe’s Group I export prices maintain narrower-than-usual discount to domestic prices, reflecting ongoing shortage of supplies for overseas markets..· Europe’s Group II base oils supply likely rises in Q2 2024 from Q1 2024 following restart of regional base oils plant.· Pick-up in shipments from US to Europe in April 2024 likely to add to regional supply at least through May 2024.· Rise in shipments from US would extend pick-up in Europe’s base oils imports in March-April 2024 from countries producing Group II base oils..· US export price discount to Europe Group II prices narrows sharply throughout Q2 2024.· Narrower discount could deter some arbitrage shipments.· Any such trend would boost Europe’s reliance on Group II supplies from regional sources.· Importers could pass on rise in US cargo prices through higher domestic prices.· Any such move would coincide with typical seasonal slowdown in Europe’s demand in months of July and August.· Any such move would increase further the competitiveness of Group III base oils.· Europe’s Group III prices maintain premium to US prices, sustaining incentive for overseas refiners to move more supplies to the region.· Several Group III shipments load from southeast Asia in June 2024 before moving to Europe..· Europe’s April Group III base oils supply reverts to more typical levels following surge in supplies in March 2024..· Europe’s Group III supply could stay firmer through rest of Q2 2024 amid overseas refiners’ higher incentive to move more shipments to the region rather than the US.· A pick-up in Group III supplies from overseas refiners would help to cover for plant maintenance work in Europe in Q2 2024.· Europe’s weak Group III prices relative to other grades and relative to feedstock prices suggests the region’s supply remained more than sufficient even with the maintenance work in Q2 2024..Americas/EMEA base oils demand outlook: Week of 24 June.Asia base oils supply outlook: Week of 24 June.Global base oils margins outlook: Week of 24 June.Global base oils arb outlook: Week of 24 June
· US base oils premium to feedstock/heating oil prices stays high even after recent dip.· Firm base oils premium likely to sustain incentive for refiners to maximise base oils output.· Supply could get further support from less workable arbitrage to overseas outlets, complicating removal of any surplus volumes.· Supply could get further support from more feasible arbitrage to move Group II shipments from Asia to US, especially for heavy grades.· Supply could get further support from typical seasonal slowdown in US domestic demand in months of July and August..· Tighter surplus supply of light-grade base oils in US in Q2 2024 likely to impact flows to Mexico the most, with minimal impact on markets like India.· India’s imports of Group II base oils from US consist mostly of mid-viscosity grades rather than light-grade base oils..· Closed arbitrage to India, and that country’s role as key outlet for surplus mid-viscosity grades, could instead complicate removal of those supplies from US market..· South Korea’s May base oils exports to US rise to five-month high, but extend slump from year-earlier levels for fifth month..· Fall in shipments contrasts with rise in South Korea’s base oils exports to Europe in May 2024 for second time in three months to 13-month high.· Diverging trends point to increased focus on European market, raising prospect of South Korea’s exports to US staying lower.· South Korea’s May exports to US set to boost US Group III supply in H1 July 2024..· Europe’s tight Group I supply curbs availability for export to markets outside the region.· Exports from key Group I producers in Europe fall in April 2024 for fifth time in six months from year-earlier levels..· Fall in exports contrasts with rise in Europe’s total base oils exports to non-EU markets in April 2024.· Europe’s Group I export prices maintain narrower-than-usual discount to domestic prices, reflecting ongoing shortage of supplies for overseas markets..· Europe’s Group II base oils supply likely rises in Q2 2024 from Q1 2024 following restart of regional base oils plant.· Pick-up in shipments from US to Europe in April 2024 likely to add to regional supply at least through May 2024.· Rise in shipments from US would extend pick-up in Europe’s base oils imports in March-April 2024 from countries producing Group II base oils..· US export price discount to Europe Group II prices narrows sharply throughout Q2 2024.· Narrower discount could deter some arbitrage shipments.· Any such trend would boost Europe’s reliance on Group II supplies from regional sources.· Importers could pass on rise in US cargo prices through higher domestic prices.· Any such move would coincide with typical seasonal slowdown in Europe’s demand in months of July and August.· Any such move would increase further the competitiveness of Group III base oils.· Europe’s Group III prices maintain premium to US prices, sustaining incentive for overseas refiners to move more supplies to the region.· Several Group III shipments load from southeast Asia in June 2024 before moving to Europe..· Europe’s April Group III base oils supply reverts to more typical levels following surge in supplies in March 2024..· Europe’s Group III supply could stay firmer through rest of Q2 2024 amid overseas refiners’ higher incentive to move more shipments to the region rather than the US.· A pick-up in Group III supplies from overseas refiners would help to cover for plant maintenance work in Europe in Q2 2024.· Europe’s weak Group III prices relative to other grades and relative to feedstock prices suggests the region’s supply remained more than sufficient even with the maintenance work in Q2 2024..Americas/EMEA base oils demand outlook: Week of 24 June.Asia base oils supply outlook: Week of 24 June.Global base oils margins outlook: Week of 24 June.Global base oils arb outlook: Week of 24 June