Global base oils - week of March 6: Supply outlook

·        Diesel prices hold firm relative to crude oil, down from Feb 2022-Jan 2023 levels, well above pre-Feb 2022 levels.

·        Firm diesel prices incentivize refiners to focus on middle distillates production.

·        India’s retail diesel premium to discounted crude oil stays high – incentivizing refiners to maximise middle distillates production.

·        China’s Shandong diesel premium to crude oil holds steady, at top of Feb 2022-Aug 2022 range, at bottom of Sep 2022-Dec 2022 range.

·        Base oils plant maintenance work cuts supply in US/Asia in Q1-Q2 2023.

·        US base oils producers face pressure from structural change in market as overseas supplies cover more domestic demand.

·        Rising domestic consumption of overseas supplies increases importance for US producers to maintain steady exports.

·        US’ December base oils supply edges up at same time as domestic/overseas demand slumps.

·        US base oils stocks surge in December, highlighting repercussion of closed arbitrage opportunities to clear surplus volumes even when outright supply remains low.

·        Trend highlights attraction for refiners to maintain lean stocks and clear surplus volumes fast.

·        Incentive to maintain lean stocks magnifies impact of unexpected supply tightness or rise in demand.

·        Europe supply tightens on halt in shipments from Russia, low base oils production levels in key markets like Italy at end-2022.

·        Europe’s base oils prices fell at end-2022/early 2023 despite more limited regional supply surplus.

·        Prices fell as supply still outweighed base oils demand.

·        Seasonal rise in European demand over coming weeks likely to reflect impact of more limited regional supply.

·        Signs of plentiful Group II supplies in Europe in early 2023 contrast with Netherlands’ low stocks, high exports.

·        Netherlands' wave of base oils exports to Singapore continue through Q1 2023.

·        China’s February base oils output falls to multi-year low. Imports show signs of rising, but less than usual.

·        China’s low base oils supply contrasts with reviving industrial activity, suggesting either demand is set to surge or industrial activity is set to slow.

·        Thailand’s January base oils output rises to ten-month high ahead of stronger rise in domestic/Chinese demand later in Q1.

·        Asia-Pacific Group I supply stays balanced-to-tight even with recovery in Thailand’s output.

·        Japan’s January base oils output falls to eleven-month low as refiners focus on kerosene production.

·        Japan’s base oils output likely to stay lower over coming months during round of plant maintenance work.

·        Indonesia’s Group III base oils exports show signs of extending sustained slowdown into start of this year.

·        Singapore’s four-week average base oils exports rise to highest since last June – suggesting pick-up in demand from term buyers.

·        Singapore’s four-week average base oils exports to China rise to highest in a year.

·        India’s February base oils imports show signs of holding steady vs January, up from end-2022, still much lower than in recent years.

·        India’s February imports show signs of rebound in shipments from South Korea, rise in supplies from Taiwan.