Americas/EMEA base oils supply outlook: Week of 25 August

·         US base oils prices stay in relatively narrow range versus feedstock prices since late last year.

·         Range-bound price-differentials contrast with more volatile margins in most of 2024, pointing to steadier supply-demand fundamentals so far this year.

·         Range-bound margins likely incentivize refiners to maintain steady output.

·         Steady output and seasonal slowdown in demand maintain importance of high export volumes to avoid large build-up of surplus supplies.

·         Domestic supply could face additional pressure following fire at major US blending plant, raising prospect of slowdown in demand from that buyer.

·         US supply could face additional pressure from signs of pick-up in surplus volumes in growing number of other overseas markets.

·         Arbitrage remains open to multiple markets such as Europe.

·         Signs of steady spot volumes to India, even with prices at lower levels, could point to moves to avoid oversupply-situation in Europe.

·         Arbitrage from Asia to Americas stays hard to work, limiting additional flows and competition from that market for now.

·         Overseas Group III base oils shipments to US could rise over coming months following completion of heavy round of plant-maintenance in Middle East and Asia in Q2 2025.

·         US Group III base oils supply likely to rise in Sept 2025 following arrival of several large shipments from Middle East.

·         Rise in supply would follow signs of lower-than-usual volume of Group III shipments reaching US in Aug 2025.

·         South Korea’s base oils exports to US stay low in July 2025, reflecting that dynamic.

·         Slowdown in US shipment-arrivals in Aug 2025 would help to balance out impact of seasonal slowdown in domestic demand.

·         Rise in shipments reaching US in Sept 2025  would help to replenish stocks and meet post-summer pick-up in demand.

·         Dynamic increases importance of that pick-up in demand.

·         Latin America’s base oils supply likely to stay sufficient to cover requirements.

·         More muted demand likely to leave existing inventories lasting longer.

·         Supply likely to get further support from pick-up in surplus shipments from overseas markets in Q3 2025.

·         Rise in South Korea’s exports to Latin America in July 2025 reflects that dynamic.

·         Latin America’s supply-balance stays tight through 1H 2025.

·         Tight supply boosts pressure on buyers to seek replenishment volumes.

·         Persistently balanced-to-tight supply suggests that buyers may be more comfortable with current dynamic, and that they are confident they can secure replenishment volumes as and when required.

·         Europe’s Group I base oils supply likely to get support from firm margins that incentivize refiners to maintain high output.

·         High output at time of year when demand faces seasonal slowdown could trigger faster and larger pick-up in surplus supplies.

·         Recent shipment of Group I base oils from Europe to Nigeria points to such a pick-up in surplus supply during Q3 2025.

·         Europe domestic Group I SN 150 price-premium to export price rises to widest level in more than a year, pointing to growing surplus volumes of light grades especially.

·         Europe’s Group I light and heavy-grade export prices fall relative to CFR UAE prices to lowest level in more than a year.

·         Europe’s Group I export prices stay higher than CFR UAE prices even after recent fall, complicating arbitrage opportunities.

·         Even so, increasingly narrow Europe price-premium could trigger pick-up in negotiations to line up surplus volumes to move to a region where availability of SN 500 is tighter than usual.

·         Europe’s Group II base oils supply likely to be readily available amid steady regional output and healthy import-volumes from other markets.

·         Europe’s Group II base oils imports rise to thirteen-month high in June 2025, reflecting that dynamic.

·         Imports rise ahead of seasonal slowdown in region’s demand during summer months.

·         Supply could get further boost from still-wide-open arbitrage to moves more shipments to Europe from US and Asia.

·         Supply could get additional support from any slowdown in requirements for Europe shipments in overseas markets following expected start of exports from new unit in Singapore in coming weeks.

·         Europe’s Group III base oils supply shows signs of holding in narrow range even as plant-maintenance impacts shipments from different markets in recent months.

·         Europe’s Group III supply stays in narrow range in June 2025 for fourth month.

·         Supply holds steady as rise in shipments from Middle East balances out drop in flows from Spain and Asia.

·         Supply shows signs of staying at similar levels in July 2025 as recovery in shipments from Spain and Asia cushions any slowdown from Middle East.

·         Supply from Asia and Spain shows signs of holding at firmer levels in August 2025. 

·         Europe’s steady supplies contrast with US’ more volatile Group III base oils supply.

·         Dynamic partly reflects US’ almost-total reliance on imports to cover Group III requirements.

·         Regional Group III production in Europe covers significant portion of its requirements, leaving it less reliant than US on supplies from overseas markets.