· Diesel prices stay weak relative to crude and to base oils.· Weak diesel prices/firm base oils values incentivize refiners to increase base oils output.· Higher US base oils output would coincide with already-healthy availability.· US supply surplus lingers into Q2 2023 even after producers clear record volume of supplies through export market in late Q1 2023.· Ongoing flow of arbitrage shipments from US highlights need to remove lingering surplus.· Ongoing surplus reduces producers’ leverage to target higher prices.· Ongoing surplus, combined with high base oils prices relative to diesel, instead raise blenders’ expectations of further fall in outright prices.· US base oils prices already stayed under pressure in Q1 2023 despite slump in Americas’ February base oils supply to a two-year low.· Price pressure suggested that demand weakness outweighed the size of the fall in supply.· Current price pressure is unusual at a time of year when prices usually rise.· Lingering surplus US supplies highlight repercussions of domestic blenders’ delayed stock replenishment and signs of moves to hold smaller inventories than previously.· Lingering surplus highlights need for refiners to be able to clear volumes fast to avoid large supply-build.· US base oils exports surge to record high in March, with swathe of surplus volumes moving to markets like Mexico..· Shipments to those outlets limit more widespread market impact by curbing supply-build in higher-priced markets like Europe.· Access to alternative outlets for US supplies likely to extend into Q2 2023 amid tighter surplus availability in Europe and Asia.· Argentina may need to rely more on domestic base oils production or US supplies over coming months amid tighter surplus availability in Europe and less attractive arbitrage for Asia-Pacific supplies.· Argentina’s March base oils imports jumped on back of wave of arbitrage shipments from those markets and from Mideast Gulf, balancing out fall in domestic output.· Fall in Americas Q1 supply mostly reflected planned factors such as plant maintenance work.· Periods of unexpected drop in supply tend to have larger market impact because buyers and sellers have less time to prepare accordingly.· Europe’s base oils supply likely to stay more balanced in Q2 after refiners cleared surplus in Q1.· Steady regional demand in Q2 likely to limit any significant rise in surplus supply.· Drop in competition from Russian supplies for markets like West Africa provide European refiners with convenient outlet for surplus volumes.· Removal of Russian supplies from European market provide refiners with additional regional demand.· US exports to Europe in March and Q1 2023 hold steady rather than surge, curbing any build-up of surplus supplies in European market..· Europe’s Group II supply could get a boost in coming months as firm prices boost attraction of moving more US/Asia cargoes to the region.· Europe’s Group III base oils supply likely to tighten during Q2 2023 amid overlapping plant maintenance in Spain and South Korea, and slump in supplies from Indonesia.· Spain’s April Group III base oils exports already fall to four-month low even before maintenance work begins.· Europe’s refiners face challenge of avoiding supply-build in Q3 2023, when demand is set to fall..Global base oils - week of May 15: Demand outlook.Contact us for more information about the data for this story
· Diesel prices stay weak relative to crude and to base oils.· Weak diesel prices/firm base oils values incentivize refiners to increase base oils output.· Higher US base oils output would coincide with already-healthy availability.· US supply surplus lingers into Q2 2023 even after producers clear record volume of supplies through export market in late Q1 2023.· Ongoing flow of arbitrage shipments from US highlights need to remove lingering surplus.· Ongoing surplus reduces producers’ leverage to target higher prices.· Ongoing surplus, combined with high base oils prices relative to diesel, instead raise blenders’ expectations of further fall in outright prices.· US base oils prices already stayed under pressure in Q1 2023 despite slump in Americas’ February base oils supply to a two-year low.· Price pressure suggested that demand weakness outweighed the size of the fall in supply.· Current price pressure is unusual at a time of year when prices usually rise.· Lingering surplus US supplies highlight repercussions of domestic blenders’ delayed stock replenishment and signs of moves to hold smaller inventories than previously.· Lingering surplus highlights need for refiners to be able to clear volumes fast to avoid large supply-build.· US base oils exports surge to record high in March, with swathe of surplus volumes moving to markets like Mexico..· Shipments to those outlets limit more widespread market impact by curbing supply-build in higher-priced markets like Europe.· Access to alternative outlets for US supplies likely to extend into Q2 2023 amid tighter surplus availability in Europe and Asia.· Argentina may need to rely more on domestic base oils production or US supplies over coming months amid tighter surplus availability in Europe and less attractive arbitrage for Asia-Pacific supplies.· Argentina’s March base oils imports jumped on back of wave of arbitrage shipments from those markets and from Mideast Gulf, balancing out fall in domestic output.· Fall in Americas Q1 supply mostly reflected planned factors such as plant maintenance work.· Periods of unexpected drop in supply tend to have larger market impact because buyers and sellers have less time to prepare accordingly.· Europe’s base oils supply likely to stay more balanced in Q2 after refiners cleared surplus in Q1.· Steady regional demand in Q2 likely to limit any significant rise in surplus supply.· Drop in competition from Russian supplies for markets like West Africa provide European refiners with convenient outlet for surplus volumes.· Removal of Russian supplies from European market provide refiners with additional regional demand.· US exports to Europe in March and Q1 2023 hold steady rather than surge, curbing any build-up of surplus supplies in European market..· Europe’s Group II supply could get a boost in coming months as firm prices boost attraction of moving more US/Asia cargoes to the region.· Europe’s Group III base oils supply likely to tighten during Q2 2023 amid overlapping plant maintenance in Spain and South Korea, and slump in supplies from Indonesia.· Spain’s April Group III base oils exports already fall to four-month low even before maintenance work begins.· Europe’s refiners face challenge of avoiding supply-build in Q3 2023, when demand is set to fall..Global base oils - week of May 15: Demand outlook.Contact us for more information about the data for this story