Americas/EMEA base oils supply outlook: Week of 29 April

·        US Group II light-grade base oils premium to feedstock/competing fuel prices extends rise.

·        US Group II heavy-grade premium to feedstock prices extends fall.

·        US Group II heavy-grade premium remains higher than historical levels; light-grade premium is closer to historical levels.

·        Still-wide heavy-grade premium incentivizes refiners to maximise output of that product.

·        Falling diesel premium to crude boosts attraction of producing more base oils, especially when the base oils premium to VGO remains high compared with pre-2021 levels.

·        Increasingly steep discount of US domestic spot prices to refiners’ posted prices points to persistent surplus volumes.

·        South Korea’s base oils exports to US show signs of slowing in April 2024, raising prospect of drop in Group III supplies reaching US at least through May 2024.

·        US Group III base oils premium to Group II N100/120 holds at lowest since Q1 2021.

·        Steep drop in Group III premium to Group II prices previously incentivized refiners to cut Group III output.

·        The incentive shows signs of having less impact this time in face of oversupply/muted demand for Group II base oils.

·        US Group II export prices hold at levels that sustain feasibility of regular arbitrage shipments.

·        Steady flow of cargoes load from US over past month bound for destinations like India.

·        Argentina’s base oils output pauses in March 2024, leaving the country wholly reliant on imports for additional supplies.

·        Argentina’s March base oils supply lags lube demand even with rise in imports, adds to signs of drop in country’s base oils stocks.

·        Argentina’s lower base oils stocks cushion against weak demand and high inflation, raise prospect of tighter supply if demand revives earlier than expected.

·        Europe’s Group I export prices maintain premium or narrower-than-usual discount to domestic prices.

·        Firm export prices contrast with still-wide US export price discount to US domestic prices.

·        Contrasting dynamic points to more plentiful surplus supply in US, tighter Group I availability in Europe.

·        Spain’s Group I base oils output falls to six-month low in Feb 2024, reflecting that trend.

·        Slowdown coincides with signs of dwindling surplus volumes from Italy during Q1 2024.

·        Europe’s base oils imports fall in Feb 2024 to lowest in more than five years amid lower-than-usual shipments from US and Mideast Gulf.

·        Slowdown in shipments adds to tighter regional supply during Q1 2024.

·        Tighter regional supply cushions against impact of weaker demand in Q1 2024, limiting size of any supply-build.

·        Premium-grade base oils exports from Spain show signs of staying high in April 2024, with more supplies remaining in Europe. 

·        Europe sees pick-up in delivery of shipments from UAE, Bahrain, Qatar and Indonesia since late-March 2024.

·        Trend raises prospect of boosting Europe’s Group III base oils supply.

·        Trend would follow drop in global Group III base oils imports from the Middle East to seven-month low in Feb 2024.

·        Slowdown mostly reflects lower-than-usual shipments from Qatar for second month.

·        Drop in Group III shipments in first two months of 2024 impact Europe the most.

·        That dynamic could change after US Group III prices fall to discount to Europe prices.

·        Cargo from Qatar scheduled to reach Europe by end-April 2024, after Europe’s imports from Qatar almost halted in first two months of 2024.

·        China's base oils imports from Qatar and UAE surge in March 2024, adding to signs of change in trade flows from those markets.

·        US base oils exports to Kenya rise in Feb 2024 to multi-year high, cushioning impact of slowdown in shipments from Europe.

·        Markets like Kenya face prospect of attracting growing interest from markets with surplus supplies like US, and markets with growing production capacity, like India and Saudi Arabia.

·        Markets in Africa likely to show growing interest in such supplies amid prospect of slowdown in shipments from Europe.   

·        Global base oils exports to Egypt hold steady in Feb 2024 from previous month, slump vs year-earlier levels.

·        Slowdown from year-earlier levels reflects dip in supplies from Italy.

·        Trend likely to continue over coming months as supply from Italy tightens.

·        Trend would increase need for Egyptian buyers to line up supplies from alternative sources.

·        Prospect of tighter supply from Europe coincides with shipment of base oils from China to Egypt in March 2024 for first time in at least seven years.

·        Premium-grade base oils supply in UAE likely to get a boost as several shipments from South Korea arrive during final days of April 2024.