· Europe’s Group II base oils prices rise relative to Group I and Group III prices in 2023 even as supply rises, ICIS data shows.· Rise in Group II prices versus Group I and Group III prices coincides with ongoing slide in regional lube demand.· Trend suggests Group II base oils are covering a growing share of market demand as well as supply.· Europe’s Group II base oils supply rises more than 10pc in first nine months of 2023.· Group I base oils supply falls by 6pc in first nine months of 2023; Group III supply rises by 5pc..· Europe’s Group II base oils supply accounts for 32pc of regional market in first nine months of 2023, up from 30pc share in 2022.· Europe’s Group II market share almost catches up with Group III, contrasts with shrinking Group I market share..· Europe’s total base oils supply holds steady in Jan-Sep 2023 even as regional lube demand falls..· Steady supply and lower demand coincide with drop in Europe’s base oils values vs feedstock prices in 2023 vs 2022.· Europe’s Group III prices fall the most vs feedstock prices in 2023 vs 2022.· Europe’s Group II prices fall the least vs feedstock prices in 2023 vs 2022..· Trend points to larger supply-demand imbalance for Group III base oils in 2023, and smaller supply-demand imbalance for Group II base oils.· Similar supply of Group II and Group III base oils in Jan-Sep 2023 and shrinking total demand suggest Group II base oils are covering a larger share of the shrinking demand.· Its growing share of shrinking demand partly reflects blenders switching away from Group I base oils because of falling supply and stricter lube specification requirements.· Its growing share of shrinking demand suggests blenders are also switching away from Group III base oils despite plentiful supply and their ability to meet stricter lube specification requirements.· That trend could be linked to shrinking supply of Group I base oils, and blenders’ previous use of a combination of Group I and Group III base oils instead of Group II in their lubricant formulations.· Those structural changes are set to continue, raising the prospect of extending underlying support for Group II base oils demand into 2024. · Prices could be one factor that changes next year’s supply-demand dynamics.· The premium of Group III (low) prices over Group II prices averaged more than $690/t in 2023, up from close to $250/t in 2022.· The high premium added to blenders’ incentive to use more Group II base oils.· The premium over Group II base oils is ending this year at less than $300/t, down from close to $1,000/t at the start of the second quarter of the year. .Global base oils - week of Dec 18 Price outlook - margins.Base Oil News stories and analysis also available on ICIS platform
