Global base oils - week of Jan 9: Supply outlook

·        Diesel premium to crude holds steady, well below 2H 2022 highs, well above pre-Feb 2022 levels.

·        Firm diesel premium provides refiners with attractive alternative option instead of base oils production.

·        India’s retail diesel premium to crude holds firm, incentives refiners to produce more middle distillates.

·        China’s Shandong diesel premium to crude steady, pausing after sharp slide to four-month low.

·        China’s Shandong province refinery run rates rise to two-month high – improving gasoline consumption counters seasonally-weak diesel demand.

·        US refinery run rates fall at end-December to lowest since March 2021 as cold snap prompts refiners to cut output.

·        US middle distillate stocks fall last week, hold close to highest since Feb 2022.

·        US’ October base oils output stays unusually low, limiting supply surplus in Q4 2022.

·        Round of scheduled plant maintenance in US begins in January, following winter storm-related disruptions in late December.

·        Brazil’s base oils output holds steady at lower levels throughout most of 2022, balancing out weaker domestic lube demand.

·        Argentina’s firm lube demand throughout most of 2022 attracts wave of arbitrage shipments.

·        Those shipments likely to be harder to line up over coming months as Argentina’s lube demand slows.

·        Group III base oils availability likely improves as pick-up in shipments from Spain in 2H December coincide with rise in flows from Bahrain.

·        Rise in supplies follows fall in shipments to Europe in Q4 2022, even with steady demand.

·        Netherlands’ falling base oils imports in October insufficient to counter rise in domestic production, pick-up in US shipments to Europe that added to regional supply as demand slowed.

·        UK’s base oils output stays low in Q4 2022. Any extension of slowdown into 2023 could exacerbate impact of drop in Group I supplies from Russia.

·        European market just weeks away from seasonal rise in demand, but this year with no or limited supplies of Russian origin.

·        Logistical/freight complications could limit volume of Russian base oils exports to other markets instead of Europe.

·        Export complications could prompt Russian base oils producers to cut run rates.

·        Asia-Pacific market faces prospect of rise in regional producers’ shipments to China and subsequent drop in supplies to other markets.

·        Trend already shows signs of happening from some markets.

·        Thailand’s unusually low base oils output in Q4 2022 cuts surplus Group I supply in Asia-Pacific region, supports firmer prices in early 2023.

·        Japan and Indonesia’s lower base oils exports in Q4 add to tighter availability of Group I supplies.

·        Japan’s base oils production likely to fall in 2023 from unusually high levels in 2022 amid maintenance work, plant closures.

·        Indonesia’s Group III base oils exports stay lower than usual in Q4 2022 even as global demand holds firm.

·        Singapore’s four-week average base oils exports to China extend rise to highest in more than nine months.

·        Singapore’s four-week average base oils exports to India and southeast Asia fall to two-month low.

·        India’s December base oils imports show signs of falling even further versus recent months.

·        India’s December imports show signs of staying unusually high from Taiwan, lower than usual from Saudi Arabia.