· Global Group III base oils prices face prospect of sustained pressure as supply rises, ICIS data shows.· Wide Group III price premium to Group I/Group II prices and structural rise in demand incentivize some refiners to convert some Group II production to Group III.· Other refiners in markets like China and India are adding capacity through new Group III base oils plants.· Trend raises prospect of additional Group III supply entering the global market in 2024.· Current Group III price weakness suggests Group III supply already outpaces demand even before the addition of the new supplies.· US Group III price premium to US Group II prices narrows sharply in 2023 but still averages more than $700/t so far this year, versus less than $470/t in 2020-2022..· Europe’s Group III (low) price premium to Group II prices falls sharply in 2023 but still averages more than $720/t so far this year, up from average levels of less than $200/t in 2020-2022..· US base oils/lube demand falls more than 20pc in first eight months of 2023.· US’ domestic supply, or output less exports, falls more than 30pc in first eight months of 2023.· US base oils imports, consisting mostly of Group III supplies, fall 5pc in first eight months of 2023..· Smaller fall in US’ Group III base oils imports could point to firmer demand for the grade relative to other products.· Wide Group III premium to Group II and structural rise in global Group III demand boosts attraction of producing Group III base oils in place of Group II.· In the US, Group II re-refiner Safety-Kleen Sustainability Solutions is set to expand Group III production in 2024 after successful test-runs in Q3 2023.· Move adds to rise in domestic Group III production in US following conversions from Group II base oils.· Additional re-refined Group III production capacity scheduled to come online in Europe in 2024..· In Asia, China’s Group III base oils output rises in Oct 2023 to highest in more than two years following start-up of new Group III plant in Q3 2023..· India’s Group III base oils output set to rise over coming year as new production capacity starts up in the country.· Most of the rise in global Group III supply consists of base oils with limited or no OEM approvals.· Gap between Europe Group III low and high price already widens sharply in 2023 in response to balanced-to-tight supplies with OEM approvals, more plentiful availability of supplies with few or no approvals..· The new supply raises prospect of extending that dynamic in coming year.· Extension of that dynamic could in turn cut further the Group III premium to Group II base oils.· An even narrower premium could prompt some refiners to reconsider moves to produce more Group III base oils..Global base oils - week of Nov 20: Price outlook - margins
· Global Group III base oils prices face prospect of sustained pressure as supply rises, ICIS data shows.· Wide Group III price premium to Group I/Group II prices and structural rise in demand incentivize some refiners to convert some Group II production to Group III.· Other refiners in markets like China and India are adding capacity through new Group III base oils plants.· Trend raises prospect of additional Group III supply entering the global market in 2024.· Current Group III price weakness suggests Group III supply already outpaces demand even before the addition of the new supplies.· US Group III price premium to US Group II prices narrows sharply in 2023 but still averages more than $700/t so far this year, versus less than $470/t in 2020-2022..· Europe’s Group III (low) price premium to Group II prices falls sharply in 2023 but still averages more than $720/t so far this year, up from average levels of less than $200/t in 2020-2022..· US base oils/lube demand falls more than 20pc in first eight months of 2023.· US’ domestic supply, or output less exports, falls more than 30pc in first eight months of 2023.· US base oils imports, consisting mostly of Group III supplies, fall 5pc in first eight months of 2023..· Smaller fall in US’ Group III base oils imports could point to firmer demand for the grade relative to other products.· Wide Group III premium to Group II and structural rise in global Group III demand boosts attraction of producing Group III base oils in place of Group II.· In the US, Group II re-refiner Safety-Kleen Sustainability Solutions is set to expand Group III production in 2024 after successful test-runs in Q3 2023.· Move adds to rise in domestic Group III production in US following conversions from Group II base oils.· Additional re-refined Group III production capacity scheduled to come online in Europe in 2024..· In Asia, China’s Group III base oils output rises in Oct 2023 to highest in more than two years following start-up of new Group III plant in Q3 2023..· India’s Group III base oils output set to rise over coming year as new production capacity starts up in the country.· Most of the rise in global Group III supply consists of base oils with limited or no OEM approvals.· Gap between Europe Group III low and high price already widens sharply in 2023 in response to balanced-to-tight supplies with OEM approvals, more plentiful availability of supplies with few or no approvals..· The new supply raises prospect of extending that dynamic in coming year.· Extension of that dynamic could in turn cut further the Group III premium to Group II base oils.· An even narrower premium could prompt some refiners to reconsider moves to produce more Group III base oils..Global base oils - week of Nov 20: Price outlook - margins
