· US Group III base oils prices slide in recent weeks, contrasting with firmer Group II domestic and export prices.· Falling US Group III base oils prices contrast with steady-to-firm Group III prices in Europe and Asia.· Diverging price trends point to persistent oversupply of Group III base oils in US even with sustained slide in base oil imports.· Diverging price trends raise prospect of boosting domestic demand for Group III base oils at the expense of Group II base oils and of imported Group III base oils.· Falling US Group III prices cut their premium to Group II light-grade prices to narrowest since H1 2021..· Narrower premium boosts incentive for blenders to consume more Group III base oils instead of Group II base oils..· Falling US Group III prices flip their premium to Europe Group III prices to a discount for the first time since end-Aug 2023..· US Group III price discount to Europe Group III prices boosts attraction of moving more overseas Group III supplies to Europe rather than to the US..· US Group III base oils prices fall even as US domestic supply, or domestic output and imports less exports, shows a similar trend to domestic demand in recent years..· US base oils imports account for growing share of that domestic supply.· Base oil imports’ surging share of US domestic supply points to relatively firm domestic demand for Group III base oils even as US’ total base oils and lube demand falls..· Dynamic boosts attraction for domestic refiners to increase their share of domestic supply that faces relatively firm demand..· A consequence of US refiners targeting the domestic Group III base oils market would be a fall in demand for Group III supplies from overseas markets.· Another consequence would be a drop in Group II base oils output.· Rise in US base oils exports to record-high in 2023 points to slowing domestic demand for Group II base oils..· Slowing demand adds to attraction for domestic refiners to increase Group III base oils output and to cut Group II base oils output..· Cost of strategy is rising domestic Group III base oils supply and increasingly squeezed Group III base oils margins..· Benefit of strategy is lower total output, lower imports, a rising share of domestic supply, and smaller Group II surplus for export markets.· Group III base oil premium to US Group II export prices also narrows sharply in recent weeks.· But a still-wide premium may be more attractive than US Group II export supplies that frequently require steep discounts to attract overseas buyers..Global base oils margins outlook: Week of 22 April.Asia base oils demand outlook: Week of 22 April.Asia base oils supply outlook: Week of 22 April
