· US base oils values hold firm vs VGO/heating oil prices.· Sustained strength of US base oils values points to tighter supply-demand fundamentals, sustaining incentive for refiners to maintain or raise output.· US base oils supply could stay tighter at start of Q3 2024 if domestic demand stays stronger than usual for longer than usual.· Supply could stay tighter if unplanned plant production issues were to add to recent plant maintenance work.· Active start to Atlantic hurricane season adds to concerns of such a scenario.· Tighter supply and firmer domestic demand cushions the impact of a closed arbitrage to many key outlets.· An extension of the trend would mirror the US market in April 2024, when US base oils supply tightened because of a rebound in domestic demand..· Any slowdown in domestic demand, combined with firm prices, could by contrast trigger a more rapid rise in surplus supply or reduce the impact of lower production levels.· Such a scenario would increase pressure on a revival in demand from overseas markets, and on price levels that triggered such a pick-up in demand.· Shipments from US show signs of rising strongly in June 2024 after slowdown the previous month.· Such flows would limit further any build-up of surplus US supplies at start of Q3 2024.· Signs of pick-up in US shipments to Brazil and Europe in recent weeks would curb need to target markets where buyers are targeting lower prices..· Supply in the Americas could get a boost from overseas shipments from other markets as firm US prices make more feasible a pick-up in arbitrage cargoes from Asia.· Signs of pick-up in cargo flows from Asia to Americas suggests some such arbitrage shipments have already begun.· Argentina’s May base oils supply falls to seven-month low as imports slump..· Lower supply sharply lags lube demand and production, triggering fall in base oils stocks.· Lower base oils supply and inventories raise prospect of moves to procure addition volumes to replenish stocks.· Argentina’s rising lube inventories could curb scope of such moves as blenders first move to trim those stocks.· Ongoing fall in lube demand could prolong signs of buyers’ preference to secure more supplies from domestic rather than overseas sources.· Argentina’s base oils imports fall as share of total supply in first five months of 2024, reflecting ongoing signs of such moves..· Brazil’s base oils imports stay high in May 2024 and first five months of 2024 even after completion of plant maintenance in 2H 2023.· High import volumes boost their share of Brazil’s supply to 63% of total in Jan-May 2024..· Share falls from 72% in H2 2023, but rises from 56% of total in H1 2023 and 60% in 2022.· Trend points to sustained rise in requirements for overseas supplies.· Shipments from US to Brazil show signs of rising in June 2024, with several cargoes set to arrive in the coming week..· Europe’s Group I base oils refiners focus on regional market, compounding tighter availability for markets beyond Europe.· Refiners focus on regional market even with export prices at unusually competitive levels versus domestic prices.· Italy shows signs of reflecting that trend as base oils output falls to three-month low in May 2024..· Lower output coincides with drop in Italy’s base oils exports to markets outside Europe in first four months of the year, even as country’s total exports rise in Q1 2024..· UK’s April base oils supply stays higher than usual, helping to cover for firm demand in domestic and continental Europe markets..· Firmer demand in those markets curbs share of supplies available for markets outside the region.· Dynamic suggests Europe's tighter Group I supply set to impact outlets outside Europe more than regional buyers.· Dynamic increases importance for overseas buyers to line up alternative supply sources..· Europe’s Group II base oils supply likely rebounds from May 2024 after staying unusually low in April 2024 for third month..· Supply stays low in April 2024 as sustained slowdown in Netherlands’ base oils output continues for third month.· Europe’s Group II base oils prices start to weaken versus Group I prices and US Group II prices from end-Q1 2024.· Relative price weakness at end-Q1 2024/early Q2 2024 points to weak demand, with tight supply sufficient to meet demand.· Relative price weakness in more recent weeks points to firmer demand that balances out recovery in regional supply.· Any ongoing recovery in regional supply likely to outweigh any slowdown in shipments from US, where higher prices cut attraction of moving more supplies to Europe.· Even so, shipments from US to Europe show signs of reviving in June 2024 after slowdown the previous month, triggering rise in supplies in July 2024.· Any ongoing recovery in regional supply at start of Q3 2024 would likely coincide with slowdown in demand..· Europe’s Group III base oils supply likely to get boost from arrival of several shipments from Bahrain and southeast Asia in coming weeks.· Shipments of premium-grade base oils from Spain to northwest Europe hold firm through June 2024..Americas/EMEA base oils demand outlook: Week of 8 July.Asia base oils supply outlook: Week of 8 July.Global base oils margins outlook: Week of 8 July.Global base oils arb outlook: Week of 8 July.Global base oils cargo flows: Week of 8 July
· US base oils values hold firm vs VGO/heating oil prices.· Sustained strength of US base oils values points to tighter supply-demand fundamentals, sustaining incentive for refiners to maintain or raise output.· US base oils supply could stay tighter at start of Q3 2024 if domestic demand stays stronger than usual for longer than usual.· Supply could stay tighter if unplanned plant production issues were to add to recent plant maintenance work.· Active start to Atlantic hurricane season adds to concerns of such a scenario.· Tighter supply and firmer domestic demand cushions the impact of a closed arbitrage to many key outlets.· An extension of the trend would mirror the US market in April 2024, when US base oils supply tightened because of a rebound in domestic demand..· Any slowdown in domestic demand, combined with firm prices, could by contrast trigger a more rapid rise in surplus supply or reduce the impact of lower production levels.· Such a scenario would increase pressure on a revival in demand from overseas markets, and on price levels that triggered such a pick-up in demand.· Shipments from US show signs of rising strongly in June 2024 after slowdown the previous month.· Such flows would limit further any build-up of surplus US supplies at start of Q3 2024.· Signs of pick-up in US shipments to Brazil and Europe in recent weeks would curb need to target markets where buyers are targeting lower prices..· Supply in the Americas could get a boost from overseas shipments from other markets as firm US prices make more feasible a pick-up in arbitrage cargoes from Asia.· Signs of pick-up in cargo flows from Asia to Americas suggests some such arbitrage shipments have already begun.· Argentina’s May base oils supply falls to seven-month low as imports slump..· Lower supply sharply lags lube demand and production, triggering fall in base oils stocks.· Lower base oils supply and inventories raise prospect of moves to procure addition volumes to replenish stocks.· Argentina’s rising lube inventories could curb scope of such moves as blenders first move to trim those stocks.· Ongoing fall in lube demand could prolong signs of buyers’ preference to secure more supplies from domestic rather than overseas sources.· Argentina’s base oils imports fall as share of total supply in first five months of 2024, reflecting ongoing signs of such moves..· Brazil’s base oils imports stay high in May 2024 and first five months of 2024 even after completion of plant maintenance in 2H 2023.· High import volumes boost their share of Brazil’s supply to 63% of total in Jan-May 2024..· Share falls from 72% in H2 2023, but rises from 56% of total in H1 2023 and 60% in 2022.· Trend points to sustained rise in requirements for overseas supplies.· Shipments from US to Brazil show signs of rising in June 2024, with several cargoes set to arrive in the coming week..· Europe’s Group I base oils refiners focus on regional market, compounding tighter availability for markets beyond Europe.· Refiners focus on regional market even with export prices at unusually competitive levels versus domestic prices.· Italy shows signs of reflecting that trend as base oils output falls to three-month low in May 2024..· Lower output coincides with drop in Italy’s base oils exports to markets outside Europe in first four months of the year, even as country’s total exports rise in Q1 2024..· UK’s April base oils supply stays higher than usual, helping to cover for firm demand in domestic and continental Europe markets..· Firmer demand in those markets curbs share of supplies available for markets outside the region.· Dynamic suggests Europe's tighter Group I supply set to impact outlets outside Europe more than regional buyers.· Dynamic increases importance for overseas buyers to line up alternative supply sources..· Europe’s Group II base oils supply likely rebounds from May 2024 after staying unusually low in April 2024 for third month..· Supply stays low in April 2024 as sustained slowdown in Netherlands’ base oils output continues for third month.· Europe’s Group II base oils prices start to weaken versus Group I prices and US Group II prices from end-Q1 2024.· Relative price weakness at end-Q1 2024/early Q2 2024 points to weak demand, with tight supply sufficient to meet demand.· Relative price weakness in more recent weeks points to firmer demand that balances out recovery in regional supply.· Any ongoing recovery in regional supply likely to outweigh any slowdown in shipments from US, where higher prices cut attraction of moving more supplies to Europe.· Even so, shipments from US to Europe show signs of reviving in June 2024 after slowdown the previous month, triggering rise in supplies in July 2024.· Any ongoing recovery in regional supply at start of Q3 2024 would likely coincide with slowdown in demand..· Europe’s Group III base oils supply likely to get boost from arrival of several shipments from Bahrain and southeast Asia in coming weeks.· Shipments of premium-grade base oils from Spain to northwest Europe hold firm through June 2024..Americas/EMEA base oils demand outlook: Week of 8 July.Asia base oils supply outlook: Week of 8 July.Global base oils margins outlook: Week of 8 July.Global base oils arb outlook: Week of 8 July.Global base oils cargo flows: Week of 8 July
