· Diesel premium to crude remains unusually high in most markets, adding to incentive for refiners to produce more middle distillates.· Strong incentive to produce more middle distillates reflects unusually low stocks in US and Europe, concern about even tighter supply when additional sanctions on Russia take effect in December.· US middle distillates stocks hold at end-October close to lowest since 2008..· EU’s diesel stocks fall by end-August close to lowest since 2018.· India’s retail diesel premium to crude stays low, reflecting unchanged diesel price since May.· China’s Shandong province diesel premium to crude stays high, incentivizes refiners to produce more middle distillates..· US base oils plant maintenance work follows unusually steep slump in US output in August that triggered limited price reaction.· Producers face dilemma of improving their stocks position and price leverage by clearing surplus supplies through export market, along with risk of even lower export prices putting pressure on their domestic prices. · Clear-out of surplus spot shipments typically delays impact of lower supply from refinery run-cuts.· Flow of Russian cargo shipments to Turkey, Mideast Gulf reflects continuation of exports, with change of destination.· But Russian exports to Mideast Gulf need to compete with supplies of Iranian origin, reflecting diminished leverage over price.· China’s October base oils output stays low even as prices rebound.· Plant maintenance work, run cuts, tax inspections cap Chinese base oils output at low level.· Zero-Covid policy likely to deter Chinese refiners from prioritising base oils production.· Strong US/Europe diesel demand incentives Chinese refiners to maximise diesel output.· South Korea’s September base oils output, run rates stay low; middle distillates output holds firm.· Japan’s September base oils exports fall to nine-month low ahead of Group I plant closure.· India’s September base oils output and imports combined lag country’s demand.· Singapore’s 4-week average exports from domestic sources fall to lowest in more than six months.· Singapore’s sustained slowdown in exports from domestic sources is unusual..· Singapore’s total base oils exports to China over past two weeks come to less than 1,000t, down from more than 25,000t over previous two weeks.· Southeast Asia the destination for more than 60pc of Singapore’s base oils exports over past four weeks, up from around 43pc in Q3 2022.· Mideast Gulf accounts for more than 40pc Singapore’s imports over last four weeks, up from less than 20pc in Q3.· Taiwan’s base oils exports show signs of rising in early November, still lower than September.· Cargo from northwest Europe set to reach India later this week..Global base oils – week of Nov 7: Demand outlook
