Global base oils - week of Dec 19: Supply outlook

·        Diesel price premium to crude rises after sustained drop, stays higher than usual.

·        High diesel premium incentivizes refiners to produce more middle distillates. Incentive less attractive than previously.

·        India’s domestic retail diesel premium to crude climbs to highest since April, boosting attraction of increasing middle distillates production.

·        China’s Shandong diesel premium to crude extends fall to lowest since August.

·        Diesel premium to crude trends lower as supply tightness eases.

·        Global refinery run rates hold firm, adding to supply.

·        Refiners mostly show little sign of boosting base oils output in response to lower diesel values, highlighting ongoing strength of middle distillates prices.

·        Rebounding Chinese diesel exports free up more Asia-Pacific cargoes to move westwards.

·        US distillates stocks extend recovery last week to highest since February.

·        Americas base oils supply stays lower than usual heading in to Q4, limiting size of year-end supply surplus.

·        Europe’s base oils supply stays low heading into Q4, limiting size of any surplus in the face of weaker demand.

·        Lower base oils supply in Asia in Q4 curbs downward price pressure or urgency to line up arbitrage shipments to more distant markets.

·        Signs of lower global supply raises prospect of smaller surplus early next year.

·        Surplus typically helps to cushion impact of plant maintenance that usually peaks in first half of each year.

·        Jump in Italy’s base oils output in October coincides with waning regional demand. Rising supplies could help to cover for drop in Group I shipments from Russia.

·        Unusual rise in base oils exports from Netherlands to markets like US and Singapore in Q4 coincides with weak regional demand in Europe.

·        Extended fall in Group III shipments from Mideast Gulf to Europe increases region’s reliance on Spain for its Group III supplies.

·        Group III shipments from other regions would take time to adjust if supply from Spain were to fall.

·        That adjustment period raises prospect of leaving Europe with tight supplies in the interim.

·        Fall in Spain’s November premium-grade supply shows signs of extending into December, adding to tighter availability in Europe.

·        Taiwan’s supplies surge in November. Price impact more muted as China absorbs more supplies.

·        South Korea’s November base oils exports stay low, raising prospect of more balanced supply-demand fundamentals heading into start of 2023.

·        Singapore’s base oils exports surge last week to six-month high.

·        Singapore’s four-week average base oil exports rise last week to four-month high.

·        Singapore’s four-week average base oils exports to southeast Asia rise to highest in more than eight months.

·        India’s very-light grade base oils imports from Spain slump in November to fourteen-month low.

·        Drop in supplies coincides with ongoing slowdown in premium-grade shipments from Spain since mid-November.