Americas/EMEA base oils supply outlook: Week of 30 Sept

·        US base oils supply surplus could build fast if domestic demand ebbs earlier than usual and market avoids major weather-related supply disruptions.

·        Forecasts show the possibility of another storm forming and heading towards US Gulf of Mexico in coming week.

·        Expectations of rising US base oils supply add to downward pressure on demand, which adds to rising supply.

·        Refiners face challenge of halting that cycle.

·        Dynamic boosts incentive for refiners to trim output and cut attraction of moving more shipments from other markets to the Americas.

·        Some planned plant maintenance in Q4 2024 set to trim output.

·        Lower US base oils prices improve but still leave complicated any arbitrage opportunities to move surplus volumes to other markets. 

·        Supply could build fast even if regular shipments to West Africa and India in Q3 2024 slowed pace of build-up of surplus volumes.

·        Several more Group I cargoes load from US in late Sept 2024 before heading to Europe and West Africa.

·        Shipments point to price levels that are competitive enough to attract buying interest in overseas markets.

·        Lower US base oils prices cut attraction of moving additional supplies from Asia and Middle East to Latin America.

·        Arrival of some such shipments already likely to curb demand in some markets for US supplies.

·        Argentina’s base oils supply rises to thirteen-month high in Aug 2024 following delivery of large, rare shipment from Saudi Arabia.

·        Argentina’s steady base oils output and weak demand already curb country’s requirements for base oils imports.

·        Lower requirements for imports were less problematic for US suppliers when US availability was tighter.

·        Lower requirements for imports could be more problematic for US suppliers if surplus availability rises over the coming months.

·        Shipment from Saudi Arabia likely to compound Argentina’s drop in import requirements.

·        Any arbitrage shipments from Asia would cut further the need for US supplies.

·        Dynamic highlights importance for US suppliers to remove the attraction for suppliers in other markets to move more shipments to outlets like Argentina.

·        Less feasible arbitrage to move shipments to US contrasts with increasingly attractive arbitrage to move more Group III base oils to Europe.

·        Europe sees surge in shipments from Bahrain/UAE compared with US and Asia in July 2024.

·        Rise in shipments could reflect response to Europe’s steep Group III price premium to prices in Asia and especially US since Q2 2024.

·        Europe’s Group III price premium to prices in Asia and US widens further during Q3 2024, raising prospect of additional shipments moving to the region over the coming months.

·        Any such rise in shipments would help to cover for likely drop in regional output because of planned shutdown of Group III unit in Spain for maintenance work.

·        Spain’s exports of premium-grade base oils show signs of slowing in Sept 2024 even as another cargo moves to northwest Europe at end-Sept 2024.

·        Slowdown in shipments points to impact of scheduled plant maintenance work even before it begins.

·        Europe’s Group I base oils supply could face adjustment over coming weeks after lower prices cut refiners’ margins, trim attraction of moving more arbitrage shipments to Europe.

·        Lower prices are too late to reverse shipments already bound for Europe, including shipment from US set to reach northwest Europe in H1 Oct 2024.

·        Surplus availability of Group I base oils supply in Europe is already sufficient to move shipment from Mediterranean market to Nigeria in Sept 2024.

·        Europe’s Group II base oils supply shows signs of extending recovery in Q3 2024 after plant maintenance curbs regional output in H1 2024.

·        Group II supply could get further boost from increasingly firm base oils prices relative to other regions, especially the US.

·        Widening Europe Group II premium to US prices boosts attraction of moving surplus US supplies to Europe rather than other outlets like India.

·        Surplus US cargoes could still target other markets to avoid large build-up of supplies in Europe and subsequent price-impact of any large rise in supplies.

·        Nigeria’s base oils supply shows signs of improving amid signs of pick-up in spot shipments to the country from US and from northwest Europe.

·        Rise in shipments to Nigeria points to rising surplus volumes in other markets.

·        Saudi Arabia’s shipment to Argentina in Q3 2024 is first from the Middle East Gulf country to Argentina in at least four years.

·        Shipment could reflect moves by Saudi Arabia to further expand its outlets beyond US, Europe, South Africa and Asia.

·        Global base oils imports from Qatar slump in July 2024, contrasting with steadier flows from Bahrain/UAE.

·        Drop in Asia’s premium-grade base oils imports from Qatar in Aug 2024 points to more extended slowdown in shipments from the island-state.