· US domestic Group II light-grade base oils price rises strongly relative to feedstock and diesel prices in recent weeks.· US domestic Group II light-grade base oils price rises relative to Group II light-grade export price, relative to domestic Group II heavy-grade price and relative to Group III prices in recent weeks.· US domestic Group II light-grade domestic base oils price rises relative to Europe and Singapore Group II prices in recent weeks.· Outperformance of US domestic Group II light-grade price relative to prices of other products and to prices in other regions points to tighter supply-demand fundamentals.· Muted US consumption suggests that tighter supply rather than stronger demand is the key factor driving strength in light-grade prices.· Tighter supply reflects various short-term rather than structural factors in response to weak demand and recent oversupply.· Outperformance of US domestic Group II light-grade price incentivizes refiners to halt or reverse many of those short-term factors.· Reversal of short-term factors would raise prospect of market reverting to oversupply.· US domestic Group II light-grade price premium to VGO rises to four-month high in May 2024..· Rising premium to VGO and heating oil, and falling heating oil premium to crude oil, incentivizes refiners to produce more Group II light grades rather than diesel.· Trend contrasts with unusually weak light-grade premium to VGO in early 2024 that incentivized refiners to produce more diesel, tightening light-grade supply.· Firmer US Group II light-grade price cuts its discount to Group II heavy-grade price to narrowest since Q3 2022..· Firmer light-grade price so far in Q2 2024 cushions impact of relatively weaker heavy-grade price, adds to incentivize for refiners to maintain or raise base oils output..· US domestic Group II light-grade premium to US light-grade export price rises through April 2024, contrasts with further drop in domestic heavy-grade premium to export price..· Wider domestic light-grade premium to export prices increases incentive for refiners to curb exports..· Any such slowdown in US shipments would follow surge in US exports to Mexico to record-high levels in Q1 2024..· Surge in US exports in Q1 2024, and especially shipments to markets like Mexico, added to tighter light-grade supply..· US domestic Group II light-grade discount to Europe Group II prices shrinks so far in Q2 2024 to narrowest in five months.· Smaller discount cuts attraction of moving more surplus supplies to Europe or other outlets like Israel.· US Group II light-grade price discount to US Group III 4cSt prices shrinks in Q2 2024 to narrowest since Q1 2020..· Narrower discount boosts incentive for refiners to produce more Group II rather than Group III base oils..· Any such move would contrast with US refiners’ recent moves to boost Group III base oils output partly in response to weak demand and prices for Group II base oils.· US refiners’ moves to produce Group III base oils added to tighter light-grade supply.· Firmer US Group II light-grade prices raise prospect of recovery in supply.· Any revival in light-grade supplies would need a reciprocal recovery in domestic demand to avoid refiners reverting to those short-term factors to limit supply..Global base oils margins outlook: Week of 20 May.Asia base oils demand outlook: Week of 20 May.Asia base oils supply outlook: Week of 20 May
· US domestic Group II light-grade base oils price rises strongly relative to feedstock and diesel prices in recent weeks.· US domestic Group II light-grade base oils price rises relative to Group II light-grade export price, relative to domestic Group II heavy-grade price and relative to Group III prices in recent weeks.· US domestic Group II light-grade domestic base oils price rises relative to Europe and Singapore Group II prices in recent weeks.· Outperformance of US domestic Group II light-grade price relative to prices of other products and to prices in other regions points to tighter supply-demand fundamentals.· Muted US consumption suggests that tighter supply rather than stronger demand is the key factor driving strength in light-grade prices.· Tighter supply reflects various short-term rather than structural factors in response to weak demand and recent oversupply.· Outperformance of US domestic Group II light-grade price incentivizes refiners to halt or reverse many of those short-term factors.· Reversal of short-term factors would raise prospect of market reverting to oversupply.· US domestic Group II light-grade price premium to VGO rises to four-month high in May 2024..· Rising premium to VGO and heating oil, and falling heating oil premium to crude oil, incentivizes refiners to produce more Group II light grades rather than diesel.· Trend contrasts with unusually weak light-grade premium to VGO in early 2024 that incentivized refiners to produce more diesel, tightening light-grade supply.· Firmer US Group II light-grade price cuts its discount to Group II heavy-grade price to narrowest since Q3 2022..· Firmer light-grade price so far in Q2 2024 cushions impact of relatively weaker heavy-grade price, adds to incentivize for refiners to maintain or raise base oils output..· US domestic Group II light-grade premium to US light-grade export price rises through April 2024, contrasts with further drop in domestic heavy-grade premium to export price..· Wider domestic light-grade premium to export prices increases incentive for refiners to curb exports..· Any such slowdown in US shipments would follow surge in US exports to Mexico to record-high levels in Q1 2024..· Surge in US exports in Q1 2024, and especially shipments to markets like Mexico, added to tighter light-grade supply..· US domestic Group II light-grade discount to Europe Group II prices shrinks so far in Q2 2024 to narrowest in five months.· Smaller discount cuts attraction of moving more surplus supplies to Europe or other outlets like Israel.· US Group II light-grade price discount to US Group III 4cSt prices shrinks in Q2 2024 to narrowest since Q1 2020..· Narrower discount boosts incentive for refiners to produce more Group II rather than Group III base oils..· Any such move would contrast with US refiners’ recent moves to boost Group III base oils output partly in response to weak demand and prices for Group II base oils.· US refiners’ moves to produce Group III base oils added to tighter light-grade supply.· Firmer US Group II light-grade prices raise prospect of recovery in supply.· Any revival in light-grade supplies would need a reciprocal recovery in domestic demand to avoid refiners reverting to those short-term factors to limit supply..Global base oils margins outlook: Week of 20 May.Asia base oils demand outlook: Week of 20 May.Asia base oils supply outlook: Week of 20 May
