Global base oils arb outlook: Week of 2 Sept

·        Asia’s Group II prices maintain steep discount to US prices in Q3 2024, keeping arbitrage from US shut.

·        Europe’s Group II prices maintain premium to US prices, keeping more feasible the arbitrage from US to Europe than from Europe to US.

·        Wave of base oils shipments move from US to Singapore in Q1 2024, when arbitrage to Asia was more feasible.

·        Wave of shipments from US continues to move to Singapore through Q2 2024, when arbitrage to Asia was shut.

·        US shipments continue to reach Singapore through Q3 2024.

·        Continuation of shipments to Singapore point to factors independent of closed arbitrage to Asia.

·        Shipments move to Asia at a time when arbitrage turns more feasible to move cargoes from Asia to the Americas.

·        More feasible arbitrage from Asia to Americas reflects weaker prices, seasonal slowdown in demand and pick-up in surplus supply in Asia in Q3 2024.

·        Shipments from US to Asia add to supply in Asia in Q3 2024 at same time as arbitrage shipments from Asia seek to trim surplus supply.

·        Wave of base oils shipments move from Europe to US from end-2023 through H1 2024.

·        Shipments from Europe to US point to factors independent of closed arbitrage to US.

·        Base oil shipments move from Europe to US at a time when arbitrage turns more feasible to move more cargoes from US to regular outlets like Europe and less regular markets like India.

·        More feasible arbitrage from US to other markets in Q1 2024 reflects weaker prices, seasonal slowdown in demand and pick-up in surplus supply in US at that time.

·        Shipments from Europe to US instead add to supply in US and trim supply in Europe in Q1 2024, at a time when plant maintenance work cut Europe's supply availability.

·        Base oils shipments continue to move from Europe to US through Q2 2024, when Europe faced seasonal pick-up in regional demand.

·        Shipments from US to Singapore and from Europe to US point to factors independent of arbitrage opportunities.

·        The shipments still influence arbitrage opportunities by impacting supply dynamics in the source and destination markets.

·        The impact is all the greater when the shipments add volumes to markets seeking to clear supplies or remove volumes from markets seeking additional supplies.