· Steady flow of US arbitrage shipments could limit size of supply-build in US at end-2023/early 2024.
· US prices send mixed signals to refiners – firm domestic prices vs feedstock/competing fuel prices incentivize refiners to maintain or raise output; weak export prices incentivize lower production.
· US export prices should have growing influence on production plans amid sustained rise in shipments to overseas markets.
· US Group III supplies likely to remain plentiful amid wave of shipments from Asia, Mideast Gulf.
· US’ October base oils supply stays low as plant maintenance work cuts base oils output.
· Output likely stayed lower than usual in Nov 2023 amid gradual resumption of normal operations following completion of maintenance work.
· Low US supply and firm demand curbs speed of any build-up of surplus volumes in Q4 2023, raises prospect of smaller overhang at start of Q1 2024 compared with year-earlier levels.
· Prospect of pick-up in US base oils imports in Dec 2023 could counter impact of lower domestic production in Q4 2023.
· Any such trend could result in more plentiful availability of Group III base oils, smaller surplus of other grades.
· Brazil’s November base oils supply holds firm as higher-than-usual imports cushion low domestic production.
· Brazil’s November base oils output rises month-on-month for first time in five months, likely to extend recovery following completion of prolonged round of plant maintenance work.
· Resumption of normal production set to curb Brazil’s requirements for overseas supplies.
· Brazil’s surge in imports in 2H 2023 had provided a valuable outlet for shipments from the US.
· Prospect of slowdown in imports set to leave rise in US shipments needing to target other markets instead.
· Europe’s Group I supply surplus carried over from 2023 likely to be smaller than year-earlier levels.
· Europe’s Group II supply could get boost as firm prices relative to other markets increases attraction of moving more supplies to the region.
· Europe’s Group III supply could get boost from signs of pick-up in shipments from Spain.
· Shipment of more Group I supplies from Europe to southeast Asia at end-2023 likely to limit size of any surplus of the grade at start of this year.
· Shipment contrasts with end-2022, when supplies from Europe to southeast Asia consisted of cargoes from Netherlands rather than from Italy.
· Italy’s October base oils supply rises to 30-month high as output recovers to highest since April 2023.
· Italy’s October base oils stocks still fall on firm consumption and exports.
· Lower stocks and pick-up in flows to Asia curb build-up of Italy’s surplus supplies in Q4 2023, raise prospect of extending that trend into early 2024.
· Europe typically faces surplus of Group I cargoes at start of each year and need to offer the supplies at competitive prices to clear the shipments.
· Any deviation from that trend could curb downward pressure on regional base oils prices.
· UK’s October base oils supply falls as output slumps to nineteen-month low.
· Lower output coincides with firm exports to non-Europe markets like Africa.
· Trend leaves Group I supply tighter in UK and in Europe, countering impact of seasonal slowdown in demand.
· Trend raises prospect of smaller-than-usual regional Group I supply surplus in Q4 2023 and in early 2024.
· Europe’s Group II prices move to increasingly steep premium to US export prices, ICIS data shows.
· Europe’s Group II light-grade differential to US domestic prices rises sharply, adding to attraction of moving more US supplies to Europe.
· Widening Europe Group II premium to fob Asia prices could attract more supplies from that region too.
· Netherlands’ October base oils supply falls to seventeen-month low.
· Lower output cuts regional Group II base oils supply at a time of year when regional demand faces a seasonal slowdown.
· Lower output raises prospect of curbing speed and size of any build-up of surplus supplies in Q4 2023, leaving market better balanced at start of 2024.
