· Diesel prices weaken versus crude oil to lowest in three months, stay higher than usual.· Lower diesel margins and firmer base oils margins could incentivize refiners to maintain or raise output at a time of year when demand typically eases.· Americas Group I base oils supply likely to stay lower because of plant maintenance work in Q4 2023.· US Group II refiners could face more pressure to adjust run-rates if recent import-rule changes in Mexico curb flow of shipments of light-grade base oils to that market.· Any such slowdown would cut outlets for surplus light-grade supplies at a time when domestic demand in US faces seasonal slowdown.· Closed arbitrage to move Group II supplies to India limits further US refiners’ options unless prices adjust to make arb more feasible.· US Group III supply shows signs of pick-up in flows from Asia and Mideast Gulf in Oct 2023..· Europe’s Group III supplies from Mideast Gulf show signs of rising in Oct 2023 after slowing in Sep 2023.· Europe’s imports of Group III base oils from Mideast Gulf rise in three months to August, lag slightly the volume of supplies bound for US..· US imports from Mideast Gulf previously far exceeded volume of supplies bound for Europe.· Trend coincides with weaker US demand for Group III base oils, compounds surplus Group III base oils supplies in Europe.· Any extension of that trend would likely maintain pressure on Europe’s Group III market.· Europe’s Group III base oils supplies from Mideast Gulf show signs of slowing in September before rising again in October..· South Korea’s September base oil exports to Europe rise to five-month high..· Rise in Group III shipments would coincide with signs of pick-up in supplies from Mideast Gulf reaching Europe in October.· Rise in shipments coincides with signs of slowdown in shipments from Spain in October..· Europe’s Group II supplies from US likely fall in Oct 2023 vs Sep 2023 following slowdown in shipments in recent weeks.· Lack of surplus Group I supplies in Europe in recent months countered impact of closed arbitrage and weak demand in markets like North Africa and Turkey.· Any rise in surplus supplies at year-end would face challenge of prices adjusting to levels that make the arbitrage feasible, and lining up outlets where demand is sufficient to absorb the supplies.· Slowdown in global base oil exports to Egypt throughout most of this year highlights that challenge..· Southeast Asia shows signs of becoming more regular outlet for supplies from Europe, after plant closure in Japan tightens structural supply of Group I in the region..· Spain’s fall in Group I base oils output and run-rates continues through August, contrasts with steadier diesel run-rates..· Trend suggests refiners focusing more on boosting diesel output rather than base oils..· Global base oils exports to Mideast Gulf rise to four-month high in August, extending surge in shipments to the region..· Supplies from Asia account for almost 60pc of shipments to Mideast Gulf in first eight months of 2023, up from around 40pc during same period last year.· Trend reflects surge in Mideast Gulf base oils demand, and Asia refiners benefiting the most from that rise in demand.· Trend highlights change in global trade flows in face of tighter European supply and rising surplus volumes in Asia and US..Global base oils - week of Oct 30: Demand outlook
· Diesel prices weaken versus crude oil to lowest in three months, stay higher than usual.· Lower diesel margins and firmer base oils margins could incentivize refiners to maintain or raise output at a time of year when demand typically eases.· Americas Group I base oils supply likely to stay lower because of plant maintenance work in Q4 2023.· US Group II refiners could face more pressure to adjust run-rates if recent import-rule changes in Mexico curb flow of shipments of light-grade base oils to that market.· Any such slowdown would cut outlets for surplus light-grade supplies at a time when domestic demand in US faces seasonal slowdown.· Closed arbitrage to move Group II supplies to India limits further US refiners’ options unless prices adjust to make arb more feasible.· US Group III supply shows signs of pick-up in flows from Asia and Mideast Gulf in Oct 2023..· Europe’s Group III supplies from Mideast Gulf show signs of rising in Oct 2023 after slowing in Sep 2023.· Europe’s imports of Group III base oils from Mideast Gulf rise in three months to August, lag slightly the volume of supplies bound for US..· US imports from Mideast Gulf previously far exceeded volume of supplies bound for Europe.· Trend coincides with weaker US demand for Group III base oils, compounds surplus Group III base oils supplies in Europe.· Any extension of that trend would likely maintain pressure on Europe’s Group III market.· Europe’s Group III base oils supplies from Mideast Gulf show signs of slowing in September before rising again in October..· South Korea’s September base oil exports to Europe rise to five-month high..· Rise in Group III shipments would coincide with signs of pick-up in supplies from Mideast Gulf reaching Europe in October.· Rise in shipments coincides with signs of slowdown in shipments from Spain in October..· Europe’s Group II supplies from US likely fall in Oct 2023 vs Sep 2023 following slowdown in shipments in recent weeks.· Lack of surplus Group I supplies in Europe in recent months countered impact of closed arbitrage and weak demand in markets like North Africa and Turkey.· Any rise in surplus supplies at year-end would face challenge of prices adjusting to levels that make the arbitrage feasible, and lining up outlets where demand is sufficient to absorb the supplies.· Slowdown in global base oil exports to Egypt throughout most of this year highlights that challenge..· Southeast Asia shows signs of becoming more regular outlet for supplies from Europe, after plant closure in Japan tightens structural supply of Group I in the region..· Spain’s fall in Group I base oils output and run-rates continues through August, contrasts with steadier diesel run-rates..· Trend suggests refiners focusing more on boosting diesel output rather than base oils..· Global base oils exports to Mideast Gulf rise to four-month high in August, extending surge in shipments to the region..· Supplies from Asia account for almost 60pc of shipments to Mideast Gulf in first eight months of 2023, up from around 40pc during same period last year.· Trend reflects surge in Mideast Gulf base oils demand, and Asia refiners benefiting the most from that rise in demand.· Trend highlights change in global trade flows in face of tighter European supply and rising surplus volumes in Asia and US..Global base oils - week of Oct 30: Demand outlook
