Americas/EMEA base oils demand outlook: Week of 15 April

·        US base oils demand could face less impact from latest rise in refinery posted prices as blenders maintain strategy of keeping low inventories.

·        Muted reaction of US domestic spot prices to refiners’ higher posted prices point to ongoing availability of sufficient supply at competitive prices.

·        Expectations of sufficient supply add to attraction of continuing to procure on need-to basis.

·        US Group III base oils demand could get a boost from the product's fast-narrowing premium to Group II base oils.

·        Overseas demand for US base oils could ease in response to higher US prices and prospect of improving supply in markets like Asia.

·        Export price-discount to domestic prices and to prices in key markets like Europe stays relatively wide, even if narrower than in Feb and March 2024.

·        Still-wide export price discount vs other regions points to importance of ongoing arbitrage shipments to overseas markets.

·        Latin America’s base oils demand shows signs of steadying in markets like Mexico, falling in Argentina, and holding firm in markets like Chile.

·        Argentina’s sliding lube demand boosts incentive for domestic blenders to maintain low stocks and to procure on a need-to basis.

·        Trend cuts total base oils consumption.

·        Trend simultaneously boosts demand for base oils supplies from domestic sources and cuts demand for base oils supplies from overseas sources.

·        Argentina’s domestic base oils output accounts for almost 70% of country’s total base oils supply in first two months of 2024, up from 45% share in 2023, reflecting that trend.

·        Trend magnifies impact of weaker demand on base oils imports.

·        Trend likely had more impact on US suppliers in Q1 2024, when refiners had large surplus volumes to clear.

·        Trend likely to have less impact on US suppliers in Q2 2024, when refiners have a smaller surplus to clear.

·        Chile’s base oils imports rise in Q1 2024 year on year for second straight quarter.

·        Signs of rising base oils consumption follow a rise in Chile’s monthly economic activity index in Feb 2024 for a second month and at its fastest pace since mid-2022.

·        Europe’s domestic Group I bright stock price premium to VGO edges up but stays well below year-earlier levels.

·        Europe’s domestic Group I bright stock premium to SN 500 continues to narrow.

·        Europe’s domestic Group I bright stock price stays at discount to export prices.

·        Price weakness points to softer regional demand fundamentals for the product.

·        Europe’s base oils demand for premium-grade base oils could get a boost amid tightening availability of Group I supplies and increasingly competitive prices of Group II/III base oils.

·        Europe’s Group II heavy-grade premium to Group I SN 500 falls to lowest level in five months, reflecting that trend.

·        Overseas demand for Europe’s base oils could ease as higher prices and tighter availability incentivize buyers to turn to other sources instead.

·        Ongoing surge in shipments from Russia to India curbs further the need for buyers in that market to accept higher prices for supplies of European origin.

·        Signs of more shipments moving from US to Kenya in recent months contrast with dearth of large cargoes from US to the East African country in recent years.

·        Europe is typically Kenya’s key base oils supplier.

·        Turkey’s February base oils imports rise to eleven-month high on rebound in shipments of Group I and premium-grade supplies.

·        Surge in Turkey’s Group I imports from Italy and Greece follow slump in price of the shipments relative to supplies from Russia.

·        Turkey’s February imports from Italy rise to nine-month high, exceed shipment volumes from Greece and from Russia.

·        Imports from Italy face prospect of falling following planned closure of Group I plant in the country.

·        Any such slowdown would likely increase Turkey’s reliance on Greece and Russia to cover most of its Group I import requirements.

·        South Africa’s February base oils imports rise 66% year on year, with the Netherlands the largest supplier.

·        South Africa’s surge in import requirements could provide more opportunities for other suppliers if Europe’s shrinking Group I supply boosts its consumption of Group II base oils instead.

·        Trend would boost attraction for more supplies from the Netherlands to stay in Europe.

·        Trend would in turn boost South Africa’s requirements from other sources.