Global base oils – week of Aug 29: Supply outlook

· Diesel premium to crude oil rebounds to highest in at least two months, adds to refiners’ incentive to produce more middle distillates.

· China Shandong province diesel premium to crude rises to highest since March, coincides with energy shortage.

· India retail diesel premium to crude remains outlier – firmest since June but much lower than 2021 levels.

· Global refinery run rates diverge – stay high in US, Japan, trend down in China’s Shandong province.

· Base oils plant maintenance activity likely to pick up from September.

· Strong diesel margins/weak base oil margins incentivize refiners to trim run rates, especially in Asia.

· Planned closure of Group I plant in Japan set to take place in coming weeks.

· US refiners brace for weather-related disruptions over coming weeks.

· UK’s base oils output stays unusually low through June, and diesel run rates firm.

· Sustained drop in UK output boosts requirement for imports.

· Spain’s June base oils supply holds firm even with maintenance work that month.

· Italy’s June base oils output holds well above lows during first four months of 2022, likely rose in July-August following plant restart.

· South Korea’s June base oils output dips as middle distillates run rates rise.

· Trend follows weak base oils margins in March-May especially.

· Repeat of weak base oil margins/firm diesel margins create similar incentive for South Korean refiners to cut base oil run rates.

· Thailand’s July base oils output stays lower than usual, balancing out slower demand.

· Singapore’s 4-week avg base oils exports to China climb to highest in almost two months.

· Singapore’s base oil exports to China over past week rise to highest since mid-June.

· Singapore’s 4-week avg base oils exports to Indonesia hold unusually high, matching China volume.

· Singapore’s 4-week avg base oils imports rise over past week to 3-month high on pick-up in supplies from Qatar, China.

· Singapore takes delivery of another large cargo from China over past week. Boosts August imports from China to highest in years.

· Taiwan’s August base oils cargo loadings show signs of strong rise vs July.

· India takes delivery of supplies from Taiwan and premium-grade cargo from UAE over past week.

· Kenya takes delivery of another cargo over past week, boosting August deliveries to highest in more than six months.