· Europe’s Group III 4cSt base oils premium to Group II light grades slides in first seven months of the year to lowest since Q3 2022.· Group III 4cSt base oils premium to Group II light grades shows similar downward trend in US and Asia.· Narrower Group III base oils premium to Group II base oils has a similar effect on demand in all markets by incentivizing blenders to use more Group III base oils in their formulations.· Narrower Group III base oils premium to Group II base oils has differing effect on supply in the various markets, and differing impact on prices.· India’s Group III 4cSt/8cSt base oils imports rise in June from year-earlier levels even as country’s total imports and Group II base oils imports fall..· Rise in Group III base oils imports coincides with Group III prices that fall to increasingly narrow differential to Group II prices so far this year..· Narrower price differential boosts attraction of using Group III base oils, cuts demand for Group II base oils.· Lower demand for Group II base oils frees up more supplies, adding to pressure on regional Group II base oils prices.· Europe faces a similar dynamic, where healthy supply and competitive Group III prices incentivize blenders to use more of those supplies instead of Group II base oils.· Like Asia, any such switch frees up more Group II supplies.· The dynamic complicates moves by Group II suppliers to adjust prices that would trim even more their discount to Group III prices.· The US faces a similar price and demand dynamic, with competitive Group III prices relative to Group II incentivizing blenders to use more Group III base oils.· The impact of these trends on US supply is different.· Healthy Group III base oils supply in US partly reflects a rise in domestic Group III production at the expense of Group II base oils output, rather than in addition to Group II output, unlike other markets.· Healthy supply and consumption of Group III base oils in turn triggers fall in supply of Group II base oils, unlike other markets.· US’ narrower Group III premium to Group II base oils reflects both the weakness of Group III prices and the relative strength of Group II base oils prices, unlike other markets..· A repeat of that dynamic in other markets would require a rise in Group III production at the expense of Group II production.· An expected rise in Group III production in Asia over the coming year is instead in addition to a planned rise in Group II production.· The trend suggests that the dynamic of firmer Group II prices in response to rising Group III supply is unlikely to extend beyond the US market..Global base oils margins outlook: Week of 5 Aug.Asia base oils demand outlook: Week of 5 Aug.Asia base oils supply outlook: Week of 5 Aug
· Europe’s Group III 4cSt base oils premium to Group II light grades slides in first seven months of the year to lowest since Q3 2022.· Group III 4cSt base oils premium to Group II light grades shows similar downward trend in US and Asia.· Narrower Group III base oils premium to Group II base oils has a similar effect on demand in all markets by incentivizing blenders to use more Group III base oils in their formulations.· Narrower Group III base oils premium to Group II base oils has differing effect on supply in the various markets, and differing impact on prices.· India’s Group III 4cSt/8cSt base oils imports rise in June from year-earlier levels even as country’s total imports and Group II base oils imports fall..· Rise in Group III base oils imports coincides with Group III prices that fall to increasingly narrow differential to Group II prices so far this year..· Narrower price differential boosts attraction of using Group III base oils, cuts demand for Group II base oils.· Lower demand for Group II base oils frees up more supplies, adding to pressure on regional Group II base oils prices.· Europe faces a similar dynamic, where healthy supply and competitive Group III prices incentivize blenders to use more of those supplies instead of Group II base oils.· Like Asia, any such switch frees up more Group II supplies.· The dynamic complicates moves by Group II suppliers to adjust prices that would trim even more their discount to Group III prices.· The US faces a similar price and demand dynamic, with competitive Group III prices relative to Group II incentivizing blenders to use more Group III base oils.· The impact of these trends on US supply is different.· Healthy Group III base oils supply in US partly reflects a rise in domestic Group III production at the expense of Group II base oils output, rather than in addition to Group II output, unlike other markets.· Healthy supply and consumption of Group III base oils in turn triggers fall in supply of Group II base oils, unlike other markets.· US’ narrower Group III premium to Group II base oils reflects both the weakness of Group III prices and the relative strength of Group II base oils prices, unlike other markets..· A repeat of that dynamic in other markets would require a rise in Group III production at the expense of Group II production.· An expected rise in Group III production in Asia over the coming year is instead in addition to a planned rise in Group II production.· The trend suggests that the dynamic of firmer Group II prices in response to rising Group III supply is unlikely to extend beyond the US market..Global base oils margins outlook: Week of 5 Aug.Asia base oils demand outlook: Week of 5 Aug.Asia base oils supply outlook: Week of 5 Aug
