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

·        US base oils prices extend rise versus feedstock/competing fuel prices.

·        Increasingly weak heating oil premium to crude oil adds to attraction of maximising base oils output.

·        Availability of surplus supply likely to remain limited while buyers continue to build stocks.

·        Build-up of stocks would cushion impact of any weather-related supply disruptions in the coming weeks.

·        Tropical disturbance in Atlantic Ocean has growing chance of developing into tropical depression later this week.

·        Build-up of base oils stocks would magnify surplus to clear from start of Q4 2024 if there are no or minimal supply disruptions in the coming weeks.

·        US Group II light-grade supply likely to stay structurally tighter following refiners’ moves to produce more Group III base oils instead.

·        US Group II export price-discount to domestic prices narrows further, reflecting tighter surplus availability.

·        Strength of US Group II light-grade prices boosts their premium to Asia prices, making more feasible trans-Pacific arbitrage opportunities that could help ease US supply tightness.

·        Wave of shipments from South Korea set to reach US in Aug 2024, following arrival of large volume in July 2024.

·        Rise in shipments follows sharp slowdown in arrivals in May-June 2024.

·        Signs of slowdown in US base oils shipment volumes to overseas markets in July 2024 from previous month likely to be a reflection of tighter domestic supply-demand fundamentals.

·        Shipments to outlets like West Africa and South Africa in past month would slow further any build-up of surplus volumes.

·        Signs of regular shipments from US to Singapore would slow further any build-up of surplus volumes.

·        US Group I supply could stay tighter than usual amid pick-up in demand from Europe, where Group I brightstock prices maintain premium to US prices.

·        Concern about tighter US supply incentivizes buyers in Latin America to line up alternative sources to cut their exposure to risk of disruptions with US shipments.

·        Argentina’s base oils supply rises to nine-month high in June 2024, contrasting with fall in lube demand and production.

·        Disconnect between supply and demand fundamentals triggers increase in surplus supply and rise in base oils stocks to nine-month high.

·        Rise in base oils stocks leaves buyers better positioned to manage any supply disruptions from US during Q3 2024.

·        Rise in base oils stocks could curb buyers’ urgency to secure additional volumes.

·        Rise in base oils stocks gives buyers more leverage to line up supplies from more distant markets that take longer to arrive.

·        Base oils imports account for shrinking share of Argentina’s supplies in Q2 2024.

·        Rising reliance on domestic supplies curbs further the country's exposure to any supply disruptions from US.

·        US, Europe and Asia’s total premium-grade base oils imports from Middle East stay relatively firm in May even with weaker Group III base oils prices in US especially.

·        Imports stay firm amid steady flows from Bahrain and UAE combined in first five months of 2024.

·        Firm imports from those sources point to steady output even with pressure on Group III base oils prices.

·        Steadier flows from Bahrain and UAE contrast with sharp drop in shipments from Qatar in first five months of 2024.

·        Europe’s Group I base oils supply availability could improve amid steadier regional output, seasonal slowdown in demand and firm prices that attract arbitrage shipments from other regions.

·        Supply gets boost in July 2024 from arrival of shipments from overseas markets like US and Saudi Arabia.

·        Another cargo from Saudi Arabia is scheduled to reach Europe in H1 Aug 2024, after loading in H2 July 2024.

·        Cargo heads for Europe even amid signs of drop in total shipments from Saudi Arabia in July 2024 from June 2024.

·        Cargo would follow higher-than-usual shipments from Yanbu and Jeddah to Europe in June 2024 for a second month.

·        Signs of increasing regularity of pick-up in flows from Saudi Arabia to Europe points to new trend that taps the region’s structurally tighter supply and firm base oils prices relative to other markets.

·        Europe’s Group II base oils supply likely to be readily available amid steady regional output and signs of still-regular shipments from US.

·        Europe’s Group II light-grade premium to FOB NE Asia prices rises by more than $100/tonne since mid-May 2024 to widest since beginning of 2024.

·        Widening premium, and still-wide heavy-grade premium to Asia prices, could boost interest in working that arbitrage.

·        Europe’s Group III base oils prices maintain premium to US prices, sustaining incentive for overseas refiners to move more shipments to Europe.

·        Exports of premium-grade base oils from Spain show signs of falling in July 2024 from the previous month, including dip in flows to northwest Europe.

·        Drop in supply could tighten availability of Group III supplies with OEM approvals.

·        Global base oils exports to key African markets fall to six-month low in May 2024 amid slump in shipments from US, slowdown in flows from Europe.

·        Drop in shipments highlights volatility of supplies from US.

·        Volatility of supplies from US boosts urgency for buyers in the region to line up more regular supply sources.

·        Drop in shipments highlights ongoing reliance on Europe for steady flows and for largest share of region’s supplies.

·        Nigeria's share of total global exports to Nigeria, South Africa, Egypt and Kenya combined falls to smallest amount in more than two years.

·        Slump in shipments to Nigeria highlights complications of moving cargoes to that market, including currency risks and tight supply in Europe.

·        Pick-up in shipments from Russia to Egypt in recent months highlights opportunity for supplies from that market to tap the tighter availability of Group I base oils in Europe.