Americas/EMEA base oils demand outlook: Week of 13 May

·        US base oils demand shows signs of staying muted.

·        Recent strength in US domestic light-grade prices fails to trigger any significant pick-up in demand.

·        Muted response to recent strength of US domestic light-grade prices suggests buyers are comfortable that supply remains sufficient.

·        Muted response to recent strength of US domestic light-grade prices suggests price-strength is supply- rather than demand-driven.

·        Trend suggests that prices could face pressure once supply improves.

·        US domestic spot-price discount to US posted prices stays unusually wide, complicating price discovery.

·        Overseas demand for US light-grade base oils could face pressure following recent rise in domestic and export prices.

·        Discount of US light-grade export prices to CFR India prices narrows more sharply than discount of US heavy-grade prices since mid-March 2024.

·        Discount of US light-grade prices to CFR India prices squeezed to narrowest in more than three months.

·        Discount of US light-grade domestic prices to domestic Europe prices holds close to narrowest in more than five months. 

·        Firmer US prices relative to other regions complicate arbitrage opportunities, cuts attraction of export shipments.

·        Any slowdown in exports would contrast with wave of base oils/lube shipments to overseas markets in recent months.

·        US’ March base oils exports fall year-on-year for second time in three months.

·        US’ March lube exports surge in March for eighth month from year-earlier levels.

·        US’ March lube exports exceed base oils exports for second time in three months and for second time since 2022.

·        Surge in US lube exports in Q1 2024 helps to curb build-up of surplus base oils/lube supplies in domestic market.

·        Surge in lube exports helps to cushion against impact of weaker domestic lube demand.

·        Surge in lube exports could reflect moves by domestic blenders to lock in margins that are likely to be higher than refiners’ margins for base oils exports.

·        US lube exports to Mexico and Israel surge in March 2024 to levels that far exceed those countries’ monthly lube consumption.

·        Size of surge in lube exports to Mexico suggests supplies may be moving into other outlets besides finished lube market.

·        Shipments surge even after Mexico implemented stricter import rules in Oct 2023.

·        Surge in shipments points more to moves by US refiners to clear surplus volumes rather than moves by US’ domestic blenders to tap overseas demand.

·        Chile’s April base oils imports edge down from year-earlier levels; imports rise 12% in Jan-April 2024 from year-earlier levels.

·        Steady-to-firm imports mirror gradual, even if uneven improvement in Chile’s economic activity in Q1 2024.

·        Steady imports contrast with shrinking lube consumption in other Latin American markets like Mexico and Argentina.

·        Europe’s demand for premium-grade base oils likely to get support from narrower-than-usual premium to Group I prices, especially for Group III base oils.

·        Europe’s demand for premium-grade base oils likely to get further support from structural drop in Group I base oils supply.

·        Europe’s demand for Group II light grades could face pressure from signs of improving availability of Group III base oils, and competitive prices for the supplies.

·        Europe’s demand for Group II heavy grades could get support from tighter Group I supply and more limited competition from Group III base oils.

·        Overseas demand for European Group I base oils could ebb in face of higher prices and tighter supply.

·        Trend incentivizes overseas buyers to seek more regular flows from alternative sources.