· Global diesel prices keep pace with rising crude oil, maintain firm premium to crude.· Strong diesel premium to crude provides refiners with attractive alternative to base oils production.· India’s retail diesel premium holds firm vs crude, especially vs discounted crude.· China Shandong province diesel premium to crude holds in narrower range in recent weeks after sharp fall in December; still firm, especially vs discounted crude.· China’s diesel demand stays weak as cold weather, lunar new year holidays curb industrial activity.· Prospect of further rise in Chinese diesel production and exports could put pressure on diesel crack.· US refinery run rates recover last week after freezing weather triggers slump in output in late-December. Swift recovery suggests limited impact of cold weather..· Europe distillate stocks stay lower than usual in Q4 2022 ahead of ban on imports of diesel from Russia from early February..· Low base oils supply in Americas in Q4 2022 balances out weaker demand, leaves fundamentals relatively balanced at start of this year.· Low US base oils production in Q4 curbs export volumes.· Low November US base oils exports suggest limited surplus supplies to clear at end-2022, more balanced supply at start of 2023.· US base oils plant maintenance starts in January, curbing any supply-build.· US Group III base oils imports likely to recover in early 2023 after slowdown in shipments from Mideast Gulf and South Korea in Q4 2022.· Lack of risk-management tools magnifies impact of even small volume of surplus supplies as difficulty to manage risk curbs buyers’ willingness to lock in volumes.· Price pressure in Europe market reflects that dynamic.· Europe could face sudden supply shortage if surplus availability is smaller than expected or clears fast as demand picks up.· Any supply shortage could deepen if regional producers cut run-rates or overseas producers cut shipments to the region.· Such moves would compound drop in supply as EU sanctions on imports of base oils of Russian origin come into effect in early February.· Complications of sustaining Russian base oil exports volumes could prompt country’s refiners to cut run rates.· Europe’s Group III base oils availability likely to improve after sharp supply squeeze in Q4 2022.· Expected revival in Chinese demand over coming weeks likely to highlight lower regional stocks of products like bright stock, boosting competition for limited supplies.· Slump in Taiwan’s December base oils exports adds to signs of more balanced regional supply at start of this year.· Surge in share of Taiwan’s exports to China in December illustrate likely change in trade flows over coming months as Chinese demand revives..· Key outlets for Taiwan supplies in 2022, like India, Mideast Gulf and Latin America, likely to see slowdown in arbitrage flows this year, after surge in shipments last year.· Slide in Thailand and Indonesia’s Group I base oils exports in Q4 2022 curb moves to build stocks ahead of seasonal pick-up in demand in first few months of 2023.· Slowdown in base oils exports likely extends to South Korea’s December shipments amid low run-rates, weak margins.· Low exports curb further regional buyers’ opportunity to replenish stocks.· South Korea’s refiners incentivized to maintain low run-rates in response to still-weak margins. · Low production would continue to limit export volumes, further curbing supply-build ahead of seasonal rise in regional demand.· Slump in India’s very-light grade base oils imports in December highlights impact of lower refinery production and smaller supply surplus.· Singapore four-week average base oils exports to India extend fall to lowest in more than two months..· Chinese refiners with lower-priced feedstock of Russian origin face widespread arbitrage opportunities selling base oils cargoes at competitive prices into markets like southeast Asia and India..Global base oils -week of Jan 16: Demand outlook
· Global diesel prices keep pace with rising crude oil, maintain firm premium to crude.· Strong diesel premium to crude provides refiners with attractive alternative to base oils production.· India’s retail diesel premium holds firm vs crude, especially vs discounted crude.· China Shandong province diesel premium to crude holds in narrower range in recent weeks after sharp fall in December; still firm, especially vs discounted crude.· China’s diesel demand stays weak as cold weather, lunar new year holidays curb industrial activity.· Prospect of further rise in Chinese diesel production and exports could put pressure on diesel crack.· US refinery run rates recover last week after freezing weather triggers slump in output in late-December. Swift recovery suggests limited impact of cold weather..· Europe distillate stocks stay lower than usual in Q4 2022 ahead of ban on imports of diesel from Russia from early February..· Low base oils supply in Americas in Q4 2022 balances out weaker demand, leaves fundamentals relatively balanced at start of this year.· Low US base oils production in Q4 curbs export volumes.· Low November US base oils exports suggest limited surplus supplies to clear at end-2022, more balanced supply at start of 2023.· US base oils plant maintenance starts in January, curbing any supply-build.· US Group III base oils imports likely to recover in early 2023 after slowdown in shipments from Mideast Gulf and South Korea in Q4 2022.· Lack of risk-management tools magnifies impact of even small volume of surplus supplies as difficulty to manage risk curbs buyers’ willingness to lock in volumes.· Price pressure in Europe market reflects that dynamic.· Europe could face sudden supply shortage if surplus availability is smaller than expected or clears fast as demand picks up.· Any supply shortage could deepen if regional producers cut run-rates or overseas producers cut shipments to the region.· Such moves would compound drop in supply as EU sanctions on imports of base oils of Russian origin come into effect in early February.· Complications of sustaining Russian base oil exports volumes could prompt country’s refiners to cut run rates.· Europe’s Group III base oils availability likely to improve after sharp supply squeeze in Q4 2022.· Expected revival in Chinese demand over coming weeks likely to highlight lower regional stocks of products like bright stock, boosting competition for limited supplies.· Slump in Taiwan’s December base oils exports adds to signs of more balanced regional supply at start of this year.· Surge in share of Taiwan’s exports to China in December illustrate likely change in trade flows over coming months as Chinese demand revives..· Key outlets for Taiwan supplies in 2022, like India, Mideast Gulf and Latin America, likely to see slowdown in arbitrage flows this year, after surge in shipments last year.· Slide in Thailand and Indonesia’s Group I base oils exports in Q4 2022 curb moves to build stocks ahead of seasonal pick-up in demand in first few months of 2023.· Slowdown in base oils exports likely extends to South Korea’s December shipments amid low run-rates, weak margins.· Low exports curb further regional buyers’ opportunity to replenish stocks.· South Korea’s refiners incentivized to maintain low run-rates in response to still-weak margins. · Low production would continue to limit export volumes, further curbing supply-build ahead of seasonal rise in regional demand.· Slump in India’s very-light grade base oils imports in December highlights impact of lower refinery production and smaller supply surplus.· Singapore four-week average base oils exports to India extend fall to lowest in more than two months..· Chinese refiners with lower-priced feedstock of Russian origin face widespread arbitrage opportunities selling base oils cargoes at competitive prices into markets like southeast Asia and India..Global base oils -week of Jan 16: Demand outlook
