· Prospect of tighter Group I base oils supply in Asia-Pacific and improving supply in Europe likely to impact arbitrage opportunities over coming months, ICIS data shows.· Asia-Pacific Group I base oils supply set to fall following planned closure of base oils unit in Japan in coming weeks.· Japan’s base oils exports already fell in first seven months of 2023 following closure of another Group I base oils plant in the country in 2H 2022..· Tighter supply in Asia would contrast with prospect of rise in Europe’s Group I base oils supply following the expected resumption of normal operations at a key plant in Italy in the coming weeks.· Recovery in Italy’s base oils supply in 2H 2022 added to Group I oversupply in Europe at end of last year and early this year.· Fall in Italy’s base oils supply from May 2023 compounded Europe’s recent Group I supply tightness..· Europe’s Group I supply likely to get a further boost in coming months from seasonal slowdown in regional demand at year-end.· Europe and Asia’s diverging supply trends suggest Asia Group I base oils prices could strengthen relative to Group I prices in other regions, especially Europe.· Asia’s Group I prices already show signs of firming versus prices in other regions in recent weeks.· Asia’s Group I bright stock prices rise to four-month high amid firmer fundamentals.· Domestic Chinese bright stock price premium to Asia Group I bright stock prices stays close to highest since Feb 2023 as domestic prices rise even faster than Asia prices.· Domestic price premium widens despite weak Chinese lube demand..· Wide domestic premium raises prospect of more Asia bright stock supplies staying within the region..· Trend contrasts with increasingly narrow Asia Group II price discount to domestic Chinese prices – keeping that arbitrage shut.· Asia’s Group I base oil price discount to domestic Europe prices continues to narrow in recent weeks but stays relatively wide..· Asia’s competitive Group I prices versus Europe this year triggered wave of Group I arbitrage shipments to Mideast Gulf and India..· Asia’s Group I bright stock discount to US export prices continues to slip in September to narrowest since Q1 2023 but stays wider than usual..· Wide discount sustains steady flow of Asia bright stock shipments to Latin America this year.· Still-wide price spread between Asia and Europe/US prices suggests either expectations of sufficient Group I base oils supply going forward, or that the market has yet to reflect prospect of tighter supply in the region.· A more significant narrowing of the spread between Asia and Europe/US prices would likely complicate an extension of this year’s arbitrage shipments from Asia to markets like Mideast Gulf and Latin America..Global base oils - week of Sep 25: Price outlook - margins
· Prospect of tighter Group I base oils supply in Asia-Pacific and improving supply in Europe likely to impact arbitrage opportunities over coming months, ICIS data shows.· Asia-Pacific Group I base oils supply set to fall following planned closure of base oils unit in Japan in coming weeks.· Japan’s base oils exports already fell in first seven months of 2023 following closure of another Group I base oils plant in the country in 2H 2022..· Tighter supply in Asia would contrast with prospect of rise in Europe’s Group I base oils supply following the expected resumption of normal operations at a key plant in Italy in the coming weeks.· Recovery in Italy’s base oils supply in 2H 2022 added to Group I oversupply in Europe at end of last year and early this year.· Fall in Italy’s base oils supply from May 2023 compounded Europe’s recent Group I supply tightness..· Europe’s Group I supply likely to get a further boost in coming months from seasonal slowdown in regional demand at year-end.· Europe and Asia’s diverging supply trends suggest Asia Group I base oils prices could strengthen relative to Group I prices in other regions, especially Europe.· Asia’s Group I prices already show signs of firming versus prices in other regions in recent weeks.· Asia’s Group I bright stock prices rise to four-month high amid firmer fundamentals.· Domestic Chinese bright stock price premium to Asia Group I bright stock prices stays close to highest since Feb 2023 as domestic prices rise even faster than Asia prices.· Domestic price premium widens despite weak Chinese lube demand..· Wide domestic premium raises prospect of more Asia bright stock supplies staying within the region..· Trend contrasts with increasingly narrow Asia Group II price discount to domestic Chinese prices – keeping that arbitrage shut.· Asia’s Group I base oil price discount to domestic Europe prices continues to narrow in recent weeks but stays relatively wide..· Asia’s competitive Group I prices versus Europe this year triggered wave of Group I arbitrage shipments to Mideast Gulf and India..· Asia’s Group I bright stock discount to US export prices continues to slip in September to narrowest since Q1 2023 but stays wider than usual..· Wide discount sustains steady flow of Asia bright stock shipments to Latin America this year.· Still-wide price spread between Asia and Europe/US prices suggests either expectations of sufficient Group I base oils supply going forward, or that the market has yet to reflect prospect of tighter supply in the region.· A more significant narrowing of the spread between Asia and Europe/US prices would likely complicate an extension of this year’s arbitrage shipments from Asia to markets like Mideast Gulf and Latin America..Global base oils - week of Sep 25: Price outlook - margins