Americas/EMEA base oils supply outlook: Week of 28 Oct

·        US Group II base oils price premium extends fall vs heating oil/feedstock prices.

·        US base oils premium typically extends fall during final months of the year and at start of new year as surplus supply pressures prices.

·        An avoidance of large supply surplus would ease pressure on prices, curbing size of fall in base oils premium.

·        Recent plant maintenance work and wave of shipments to typical arbitrage outlets starting in Q3 2024 show signs of slowing any supply-build so far in Q4 2024.

·        More feasible arbitrage to markets like India, especially for heavy grades, could spur additional shipments to those markets.

·        US supply surplus still likely to growth in face of synchronized, steep seasonal fall in demand in most key markets at year-end.

·        Global base oils output faces no such similar slowdown at year-end.

·        US set to take delivery of wave of shipments from South Korea in month to late-Nov 2024.

·        Large cargo of Group III base oils from UAE also scheduled to arrive in late-Nov 2024.

·        Shipments set to arrive at time of year when distributors and blenders are cutting stocks ahead of year-end slowdown.

·        Surge in shipments follows slowdown in shipment arrivals from South Korea in month to late-Oct 2024.

·        Global base oils exports to key markets in Africa rise to seven-month high in Aug 2024 on surge in shipments from US.

·        Rise in US shipments highlights early moves to clear surplus volumes from US during Q3 2024.

·        Volatility of US shipments to Africa contrasts with steadier flows from Europe.

·        Steadier flows from Europe boost attraction of shipments from that market for buyers seeking regular supplies.

·        Global exports to Nigeria rise to eight-month high in Aug 2024.

·        Pick-up in shipments adds to signs of improving availability in US and Europe markets.

·        Europe’s base oils supply likely to increasingly outpace demand over coming months, especially for premium grades.

·        Europe’s Group I base oils supply shows signs of exceeding regional requirements.

·        Europe’s lower Group I export prices reflect that dynamic.

·        Europe’s Group I export prices remain at levels that make arbitrage hard to work, suggesting size of any surplus volumes remains limited.

·        Europe’s Group I base oils exports to markets outside the region fall in Aug 2024 for sixth time in seven months from year-earlier levels.

·        Group I exports to markets outside Europe extend trend of falling at faster pace than Europe’s total exports to markets outside Europe.

·        Trend likely reflects Europe’s shrinking supply of Group I base oils and rising availability of premium-grade base oils.

·        Trend could also reflect waning overseas demand for Group I base oils from Europe as buyers target premium-grade base oils or Group I supplies from other sources at more competitive prices.

·        Europe’s premium-grade base oils supply gets support from signs of firm output and high imports.

·        Europe’s Group II light-grade price premium to US prices narrows in past week after widening sharply since early-Sept 2024.

·        Any extension of that downward price move could point to already-sufficient supplies in European market.

·        Any extension of that price move could start to curb attraction of moving surplus supplies from US to Europe.

·        Spain’s exports of premium-grade shipments to northwest Europe typically consist of two large cargoes each month.

·        Spain’s exports to northwest Europe consist of one such cargo so far this month.

·        Drop in exports coincides with plant maintenance work in Spain, could tighten Europe’s supplies of Group III base oils with full set of OEM approval.

·        Asia’s share of global base oils exports to Middle East continues to expand in 2024 amid rise in total shipments to the region and dwindling supplies from Europe.

·        Trend magnifies impact of any slowdown in shipments from Asia to the region, such as in Sept 2024.

·        Trend also provides Asia refiners with key and growing outlet for their supplies.

·        That trend could change again, with new base oils production capacity set to start up in India in coming year.

·        Rising supply likely to trigger growing competition for outlets like Middle East.