· US base oils price premium to crude oil/heating oil extends strong rebound.· Firm premium to crude/heating oil incentivizes refiners to maximise base oils output.· US Group II light-grade price discount to Group III prices holds at narrowest in more than eight years.· Narrow price-gap incentivizes refiners to cut back Group III output, produce more Group II base oils instead.· Americas' Group II base oils supply could get additional support from increasingly feasible arbitrage to ship cargoes to the region from other markets.· Concern about weather-related supply disruptions over coming weeks continue to outweigh concern about any build-up of surplus supplies.· Another major storm heads towards US Gulf coast at start of this week, reinforcing those concerns..· Any build-up of US supplies could take longer as domestic refiners’ production covers a larger share of total supply amid a sustained slide in base oils imports.· US imports account for 16% of US supply in May 2024..· Imports share falls from 23% of total supply in 2023 to lowest since mid-2021.· Imports’ shrinking share of total supply boosts consumption of supplies from domestic sources. · Rising consumption of domestic supplies in turn cuts US refiners’ surplus volumes.· Move passes challenge of managing surplus volumes from US refiners to overseas Group III suppliers.· These overseas suppliers now face challenge of finding alternative outlets for their supplies..· Brazil’s base oils supply falls to nine-month low in June 2024 on sharp dip in imports..· Drop in supplies highlights Brazil’s reliance on shipments from US for growing share of its supplies.· Drop in supplies could incentivize buyers to diversify their supply sources..· Europe’s Group II base oils supply likely to remain readily available as shipments from US supplement recovery in regional output.· Netherlands’ May base oils output rebounds to six-month high in May 2024 following completion of plant maintenance work..· Rise in output coincides with surge in Europe’s base oils imports from US to multi-year high in May 2024.· Netherlands’ output and Europe’s imports from Group II suppliers rebounds to thirteen-month high in May 2024..· Rise in output and imports replenishes Europe’s Group II base oils supply.· Replenished supply leaves Europe better positioned to boost exports of premium grades to key overseas outlets..· Replenished supply could also cushion any change in flows from US, as Europe’s Group II price premium to US export and domestic prices continues to narrow..· Narrowing premium could incentivize US suppliers to trim shipments to Europe or to target higher prices.· Higher prices would narrow further their discount to Europe Group III prices..· Replenished Group II supply contrasts with region’s tight Group I supply.· Europe’s Group I base oils premium to VGO extends rise at a time of year when prices and margins typically face pressure from weak demand.· Rising premium points to persistently tighter supply, even with refiners incentivized to raise output.· UK’s base oils output edges lower in May 2024, adding to dip in output in Italy and Spain.· Total Group I output from the three countries falls to three-month low in May 2024, when demand typically gets a seasonal lift..· Drop in output has multiple repercussions, including firmer prices.· Tighter supply and firmer prices cut Group I volumes available for markets outside Europe.· Ongoing cargo flows from Italy to southeast Asia likely reflect term shipments.· Tighter supply and firmer prices boost demand for Group I supplies from overseas producers and incentivize markets like Turkey to increase output.· Europe’s imports from sources like Saudi Arabia, Egypt and Azerbaijan duly rise so far in 2024..· Rise in imports from those sources cuts Group I availability for other markets.· Europe’s tighter Group I supply contrasts with rebound in Group II base oils supply and steady Group III supply in May 2024.· Dynamic leaves Group II base oils accounting for largest share of Europe’s base oils supply in May 2024..Americas/EMEA base oils demand outlook: Week of 5 Aug.Asia base oils supply outlook: Week of 5 Aug.Global base oils margins outlook: Week of 5 Aug.Global base oils arb outlook: Week of 5 Aug.Global base oils cargo flows: Week of 5 Aug
· US base oils price premium to crude oil/heating oil extends strong rebound.· Firm premium to crude/heating oil incentivizes refiners to maximise base oils output.· US Group II light-grade price discount to Group III prices holds at narrowest in more than eight years.· Narrow price-gap incentivizes refiners to cut back Group III output, produce more Group II base oils instead.· Americas' Group II base oils supply could get additional support from increasingly feasible arbitrage to ship cargoes to the region from other markets.· Concern about weather-related supply disruptions over coming weeks continue to outweigh concern about any build-up of surplus supplies.· Another major storm heads towards US Gulf coast at start of this week, reinforcing those concerns..· Any build-up of US supplies could take longer as domestic refiners’ production covers a larger share of total supply amid a sustained slide in base oils imports.· US imports account for 16% of US supply in May 2024..· Imports share falls from 23% of total supply in 2023 to lowest since mid-2021.· Imports’ shrinking share of total supply boosts consumption of supplies from domestic sources. · Rising consumption of domestic supplies in turn cuts US refiners’ surplus volumes.· Move passes challenge of managing surplus volumes from US refiners to overseas Group III suppliers.· These overseas suppliers now face challenge of finding alternative outlets for their supplies..· Brazil’s base oils supply falls to nine-month low in June 2024 on sharp dip in imports..· Drop in supplies highlights Brazil’s reliance on shipments from US for growing share of its supplies.· Drop in supplies could incentivize buyers to diversify their supply sources..· Europe’s Group II base oils supply likely to remain readily available as shipments from US supplement recovery in regional output.· Netherlands’ May base oils output rebounds to six-month high in May 2024 following completion of plant maintenance work..· Rise in output coincides with surge in Europe’s base oils imports from US to multi-year high in May 2024.· Netherlands’ output and Europe’s imports from Group II suppliers rebounds to thirteen-month high in May 2024..· Rise in output and imports replenishes Europe’s Group II base oils supply.· Replenished supply leaves Europe better positioned to boost exports of premium grades to key overseas outlets..· Replenished supply could also cushion any change in flows from US, as Europe’s Group II price premium to US export and domestic prices continues to narrow..· Narrowing premium could incentivize US suppliers to trim shipments to Europe or to target higher prices.· Higher prices would narrow further their discount to Europe Group III prices..· Replenished Group II supply contrasts with region’s tight Group I supply.· Europe’s Group I base oils premium to VGO extends rise at a time of year when prices and margins typically face pressure from weak demand.· Rising premium points to persistently tighter supply, even with refiners incentivized to raise output.· UK’s base oils output edges lower in May 2024, adding to dip in output in Italy and Spain.· Total Group I output from the three countries falls to three-month low in May 2024, when demand typically gets a seasonal lift..· Drop in output has multiple repercussions, including firmer prices.· Tighter supply and firmer prices cut Group I volumes available for markets outside Europe.· Ongoing cargo flows from Italy to southeast Asia likely reflect term shipments.· Tighter supply and firmer prices boost demand for Group I supplies from overseas producers and incentivize markets like Turkey to increase output.· Europe’s imports from sources like Saudi Arabia, Egypt and Azerbaijan duly rise so far in 2024..· Rise in imports from those sources cuts Group I availability for other markets.· Europe’s tighter Group I supply contrasts with rebound in Group II base oils supply and steady Group III supply in May 2024.· Dynamic leaves Group II base oils accounting for largest share of Europe’s base oils supply in May 2024..Americas/EMEA base oils demand outlook: Week of 5 Aug.Asia base oils supply outlook: Week of 5 Aug.Global base oils margins outlook: Week of 5 Aug.Global base oils arb outlook: Week of 5 Aug.Global base oils cargo flows: Week of 5 Aug
