· Rise in US posted prices barely keeps pace with rise in feedstock costs, keeping margins under pressure.· Prices that lag rise in feedstock costs, and wide gap between US export prices and domestic prices, suggest US market continues to face surplus supply.· Persistent surplus supply points to limited moves to adjust production to trim size of surplus.· Netherlands moves unusually large volume of base oils to US in Jan 2024, even with country’s large supply surplus.· Rise in shipments to US coincides with steep fall in US base oils exports in Jan 2024.· Shipment flows add to possibility of unexpected supply issues in US in early 2024.· US Group III base oils prices maintain steep premium to Europe prices even amid signs of healthy availability and muted demand.· Steep premium continues to incentivize overseas producers to prioritise US market over other regions with more supplies..· South Korea’s February base oils exports to US fall to second-lowest level in three years, while shipments to Europe rise..· South Korea’s March base oils exports to US also show signs of staying lower.· Shipments to US fall in Feb 2024 despite US Group III prices maintaining steep premium to Europe prices.· Slowdown in shipments could reflect moves to redirect supplies to other markets as more shipments from Mideast Gulf target US.· Any extension of the trend raises prospect of curbing Group III supply from Asia in US, and increasing its reliance on supplies from Mideast Gulf.· Open arbitrage continues to provide multiple outlets for surplus US supplies..· Europe’s Group base oils I supply set to tighten following likely closure of plant in Italy in coming weeks.· Planned closure would follow pick-up in availability of spot supplies from Italy in early 2024 amid signs of clearout of stocks. · Europe’s tighter Group I supply likely to curb further its volumes for overseas markets.· Europe’s Group I export price discount to overseas markets narrows, reflecting such a trend.· Europe’s January base oils exports to non-EU markets rise from Dec 2023, fall from year-earlier levels..· Fall in shipments from year-earlier levels could reflect less feasible arbitrage at end-2023 vs end-2022.· Fall in shipments could reflect smaller overhang of surplus supplies compared with year-earlier levels.· Fall in shipments includes slump in exports to Mideast Gulf, with trend likely to continue as vessels avoid shipment via Red Sea region.· Fall in shipments to Mideast Gulf coincides with slowdown in exports from Saudi Arabia.· Trend set to leave tighter for longer the availability of high-quality Group I base oils in Mideast Gulf market. .· Europe’s Group II supply set to remain more reliant on shipments from US while region’s sole virgin base oils unit undergoes maintenance work.· Europe’s Group II supply could remain more reliant on shipments from US even after completion of maintenance work if shrinking Group I supply boosts demand for Group II base oils.· Europe’s Group III supply is more reliant on supplies from within the region in early 2024 amid more prolonged voyage times for shipments from other regions.· Trend could magnify impact of planned maintenance work on Group III unit in Europe in Q2 2024.· Europe’s Group III base oils supply already falls in Jan 2024 amid slump in shipments from Mideast Gulf..· Lower supply balances out seasonal slowdown in demand at start of year, raises prospect of limiting build-up of surplus supplies.· Any extension of the trend through Q1 2024 could leave supplies lower than usual ahead of a typical seasonal pick-up in demand around spring-time.· Slowdown in shipments in Jan 2024 partly reflects rare slump in supplies from Qatar, as well as slowdown in shipments from UAE for a third month.· Sustained slowdown in shipments from UAE suggests supplies from that market are moving to other outlets instead like the US, where Group III prices remain at a steep premium to Europe prices..· Markets like Europe and north Africa could attract more supplies from Saudi Arabia in response to slowdown in shipments via Red Sea to more regular outlets like India.· Markets like Europe would be unlikely to replace India as a key outlet for very-light grade base oils.
· Rise in US posted prices barely keeps pace with rise in feedstock costs, keeping margins under pressure.· Prices that lag rise in feedstock costs, and wide gap between US export prices and domestic prices, suggest US market continues to face surplus supply.· Persistent surplus supply points to limited moves to adjust production to trim size of surplus.· Netherlands moves unusually large volume of base oils to US in Jan 2024, even with country’s large supply surplus.· Rise in shipments to US coincides with steep fall in US base oils exports in Jan 2024.· Shipment flows add to possibility of unexpected supply issues in US in early 2024.· US Group III base oils prices maintain steep premium to Europe prices even amid signs of healthy availability and muted demand.· Steep premium continues to incentivize overseas producers to prioritise US market over other regions with more supplies..· South Korea’s February base oils exports to US fall to second-lowest level in three years, while shipments to Europe rise..· South Korea’s March base oils exports to US also show signs of staying lower.· Shipments to US fall in Feb 2024 despite US Group III prices maintaining steep premium to Europe prices.· Slowdown in shipments could reflect moves to redirect supplies to other markets as more shipments from Mideast Gulf target US.· Any extension of the trend raises prospect of curbing Group III supply from Asia in US, and increasing its reliance on supplies from Mideast Gulf.· Open arbitrage continues to provide multiple outlets for surplus US supplies..· Europe’s Group base oils I supply set to tighten following likely closure of plant in Italy in coming weeks.· Planned closure would follow pick-up in availability of spot supplies from Italy in early 2024 amid signs of clearout of stocks. · Europe’s tighter Group I supply likely to curb further its volumes for overseas markets.· Europe’s Group I export price discount to overseas markets narrows, reflecting such a trend.· Europe’s January base oils exports to non-EU markets rise from Dec 2023, fall from year-earlier levels..· Fall in shipments from year-earlier levels could reflect less feasible arbitrage at end-2023 vs end-2022.· Fall in shipments could reflect smaller overhang of surplus supplies compared with year-earlier levels.· Fall in shipments includes slump in exports to Mideast Gulf, with trend likely to continue as vessels avoid shipment via Red Sea region.· Fall in shipments to Mideast Gulf coincides with slowdown in exports from Saudi Arabia.· Trend set to leave tighter for longer the availability of high-quality Group I base oils in Mideast Gulf market. .· Europe’s Group II supply set to remain more reliant on shipments from US while region’s sole virgin base oils unit undergoes maintenance work.· Europe’s Group II supply could remain more reliant on shipments from US even after completion of maintenance work if shrinking Group I supply boosts demand for Group II base oils.· Europe’s Group III supply is more reliant on supplies from within the region in early 2024 amid more prolonged voyage times for shipments from other regions.· Trend could magnify impact of planned maintenance work on Group III unit in Europe in Q2 2024.· Europe’s Group III base oils supply already falls in Jan 2024 amid slump in shipments from Mideast Gulf..· Lower supply balances out seasonal slowdown in demand at start of year, raises prospect of limiting build-up of surplus supplies.· Any extension of the trend through Q1 2024 could leave supplies lower than usual ahead of a typical seasonal pick-up in demand around spring-time.· Slowdown in shipments in Jan 2024 partly reflects rare slump in supplies from Qatar, as well as slowdown in shipments from UAE for a third month.· Sustained slowdown in shipments from UAE suggests supplies from that market are moving to other outlets instead like the US, where Group III prices remain at a steep premium to Europe prices..· Markets like Europe and north Africa could attract more supplies from Saudi Arabia in response to slowdown in shipments via Red Sea to more regular outlets like India.· Markets like Europe would be unlikely to replace India as a key outlet for very-light grade base oils.
