Global base oils - week of Dec 12: Supply outlook

·        Diesel premium to crude continues to trend lower, slips to lowest since March.

·        Diesel premium to crude remains higher than usual, incentivizing refiners to produce more middle distillates.

·        Incentive much lower than during Q2-Q3 2022.

·        China’s Shandong diesel premium to crude still high, edges down as demand faces seasonal slowdown.

·        US, Japan refinery run rates stay high, China Shandong refinery run rates trend lower.

·        US distillate stocks rise last week to highest since February.

·        Europe’s diesel stocks fall in September to lowest in more than six years.

·        US’ October base oils exports improve from September, stay lower than usual amid plant maintenance work and competition from other producers for arbitrage outlets.

·        Any pick-up in surplus US supplies at year-end/early next year would coincide with seasonal slowdown in demand.

·        Surge in US exports to Europe in October raises prospect of adding to regional surplus and pressuring prices in that market.

·        US exports to Europe show signs of slowing in November, which would ease pressure on prices.

·        Wave of arbitrage shipments from Asia-Pacific reach markets in Latin America and Africa in Q4.

·        Arbitrage shipments benefit from high US prices, strong Americas lube demand, clearing surplus supply from Asia.

·        Shipments compound surplus supply in Europe/US markets by curbing outlets to take surplus volumes.

·        Shipments leave Asia-Pacific market better balanced in Q4.

·        Base oils output shows signs of falling in October in S. Korea, Japan, Singapore, cutting supply further.

·        Signs of slowdown in arbitrage shipments from Asia-Pacific in Q4 likely to facilitate placement of surplus supplies from Europe/US markets in coming months.  

·        Drop in Group I exports from Indonesia and Japan raise prospect of tightening regional availability.

·        Indonesia’s Group III base oils exports stay low in October for third month, coincide with Group III plant maintenance in Mideast Gulf and Europe.

·        Signs of slowdown in premium-grade exports from Spain raise prospect of cutting supply to Europe from key source that countered sharp slowdown in Group III imports from Mideast Gulf and Asia this year.

·        Singapore’s four-week average base oils exports rise last week for fifth straight week.

·        Singapore’s four-week average base oils exports to India rise to highest since late-August.

·        Singapore shipments to China pause after sustained pick-up in recent weeks.

·        Singapore’s base oils imports surge last week as second large shipment from Netherlands arrives in less than a month.

·        Rise in shipments from Netherlands to Singapore coincides with weak demand, price-pressure in Europe and comes ahead of plant maintenance in Singapore in Q1 2023.

·        Singapore’s four-week average imports from Japan fall last week close to lowest since April.

·        Taiwan’s base oils exports likely stayed high in November.

·        Taiwan’s November exports to China likely rebounded.

·        Persistent availability of domestic supplies in India partly reflects light round of refinery maintenance work this year and high refinery run rates.

·        Incentive for Indian refiners to produce base oils higher than for refiners in other markets this year in view of squeezed retail diesel premium to crude.

·        That incentive may change as retail diesel prices stay unchanged since May, while crude prices extend fall.

·        Rising incentive to produce more diesel could impact base oils output.

·        India’s November base oils imports include large pick-up in shipments from US.

·        India’s November base oils imports include pick-up in shipments of premium-grade base oils from UAE.