Global base oils arb outlook: Week of March 11

·        Asia’s Group I bright stock prices get sustained support from firm supply-demand fundamentals, ICIS data shows.

·        Asia’s structural Group I bright stock supply tightens amid fall in base oils exports from Japan, slump in shipments to Singapore.

·        Pause in Singapore’s base oils imports from Japan extend through early March 2024.

·        Plant maintenance work in Thailand in Jan-Feb 2024 cuts Group I supply and exports from that market in Jan 2024 to lowest in more than a year.

·        Tight regional supply supports unusually high Asia bright stock price premium to fob Europe prices at least through first two months of 2024.

·        Higher bright stock price premium boosts attraction of moving arbitrage shipments from Europe and Mideast Gulf to Asia.

·        Voyage time of Group I base oils shipments from Europe to Asia takes longer because of shipment via southern Africa rather than Red Sea.

·        Most recent cargo from Italy reached Singapore at end-December 2023 after loading a month earlier.

·        Next cargo from Italy scheduled to reach Singapore in coming days after loading in 1H January.

·        Availability of surplus bright stock supplies in Europe likely to fall in coming weeks as demand gets seasonal lift and as imminent plant closure cuts supply.

·        Base oils shipments from Saudi Arabia show signs of falling in Feb 2024 from previous months, with more shipments moving via Suez Canal rather than via Red Sea.

·        Logistical complications boost attraction of keeping more Asia bright stock supplies within the region.

·        Asia’s firm bright stock prices slash their discount to fob US prices to narrowest level in almost three years.

·        Narrower discount likely to curb steady flow of arbitrage shipments from southeast Asia to Latin America over past year.

·        Limited supply coincides with firm demand in Asia-Pacific market, including China.

·        China’s domestic Group I bright stock premium to fob Asia prices rises in Q1 2024 to highest since Q1 2022, boosting attraction of moving arbitrage cargoes to that market.

·        China’s domestic prices for other base oils grades stay weaker relative to Asia prices, highlighting focus of tightness on bright stock supplies.

·        Asia’s Group I bright stock prices often fall relative to other grades and other regions during the second quarter of the year as supply-demand fundamentals ease.

·        That trend could be different this year with supply likely to remain tighter than usual.