Americas/EMEA base oils - week of Feb 5: Supply outlook

·        Americas’ base oils supply likely to stay more plentiful amid lack of scheduled plant maintenance work.

·        Weakening base oils prices versus feedstock/competing fuel prices incentivize refiners to trim run-rates.

·        Weaker heavy-grade prices versus light grades erode key support for maintaining higher run-rates.

·        US base oils market shows signs of avoiding major supply-build at end-2023, pointing to active moves to curb supply.

·        US’ November base oils output falls to five-month low despite completion of scheduled Group I plant maintenance work.

·        Output falls despite lack of any scheduled paraffinic plant maintenance work.

·        Lower output points to unscheduled production issues and moves to trim run-rates.

·        Any such moves would have coincided with fall in US export prices premium to feedstock and heating oil prices.

·        Slump in US export prices for heavy grades in Nov-Dec 2023 added to incentive for refiners to trim output.

·        US’ lower base oils output in Nov 2023 counters impact of higher imports, keeping total supply lower than usual.

·        Lower supply contrasts with surge in US exports, leaving supply lagging demand for the sixth time in seven months.

·        Sustained drop in supply delays typical supply-build at year-end, leaves US base oils stocks much lower than year-earlier levels.

·        Argentina’s December base oils supply falls, cutting Q4 2023 volumes to lowest since late-2020.

·        Shrinking supply mirrors slowdown in lube demand, limiting build-up of surplus supplies.

·        Lack of supply-build likely to support steady, even if lower demand.

·        Shrinking supply/demand boosts need for domestic/overseas suppliers to boost share of total supply to limit impact of slowdown.

·        Competitive prices and relative logistical proximity leave US suppliers better positioned to boost share of Argentina’s lower supply.

·        Europe’s Group I supply surplus likely to be smaller than year-earlier levels after signs of slide in availability at end-2023.

·        Europe’s more limited availability complicates region’s ability to cover supply-tightness in Asia-Pacific market.

·        Europe’s more limited surplus availability and complication of shipments to Asia boost attraction of moving any surplus volumes to markets like Africa.

·        There were signs of some supplies moving from Europe to Asia, but via southern Africa rather than Suez Canal, extending journey time.

·        Europe’s Group I supply could get a boost from additional shipments from Saudi Arabia.

·        Europe’s Group II base oils supply likely gets a boost from regional and overseas markets.

·        Europe’s Group III base oils supply likely to remain more reliant on shipments from regional producers as cargoes from Asia and Mideast Gulf take longer to arrive.

·        Netherlands’ November base oils output recovers to more typical levels, boosting supply.

·        Netherlands’ November base oils supply almost matches demand, curbing build-up of surplus supplies at year-end.

·        Smaller surplus could limit impact of surge in shipments from US to Europe in late-2023.

·        Shipments likely to leave Europe well supplied with Group II base oils at start of 2024.

·        UK’s base oils output halts in Nov 2023, following sharp slowdown in production in Oct 2023.

·        UK absorbs wave of supplies from Europe in Nov 2023 to cover shortfall.

·        UK’s base oils supply still lags demand in Nov 2023 for third time in four months.

·        UK’s supply shortfall, and absorption of larger volumes from Europe, help to limit regional supply-build at end-2023.

·        Group I supply in Mideast Gulf could tighten as growing preference to avoid Red Sea complicates flow of supplies of Russian origin to the region.

·        Group I supply in Mideast Gulf already faces slowdown in shipments from Asia.

·        Trend increases importance of supplies of Iranian origin.