· Global Group III base oils prices stayed unusually weak or extended their fall versus Group I/II prices and feedstock prices in January 2024.· Group III prices slumped versus VGO and other base oils grades from Q2 2023 in face of weak demand and plentiful supply.· Group III prices continue to reflect weak fundamentals in 2024 even as fundamentals show signs of changing over the coming months.· Demand remains weak at start of new year but faces prospect of seasonal boost in the coming months.· More competitive Group III prices versus Group I/II prices could add to any pick-up in demand.· Group III base oils supply is set to tighten over the coming months because of scheduled maintenance work at several plants in Europe and Asia.· The timing of the maintenance work is set to coincide with any seasonal pick-up in demand.· One of those plants is the largest source of South Korea’s Group III base oils supplies for the US.· South Korea’s share of US Group III base oils imports peaked in month of March in 2022 and 2023, coinciding with seasonal pick-up in demand..· That pattern could change in 2024 because of the scheduled maintenance work in South Korea from late Q1 2024.· Finland’s base oils exports of around 232,000t in the first ten months of 2023 already fell by more than 10pc from the same period in 2022, when scheduled plant maintenance work took place in Q4 that year..· Exports could face more pressure in H1 2024, when Neste’s Porvoo refinery is scheduled to be taken offline from April to June 2024 for scheduled maintenance..· Logistical issues and weak base oils margins could also impact supply.· Europe’s Group III base oils imports from the Mideast Gulf fell in Nov 2023 to second-lowest since May 2022 amid slump in shipments from Bahrain and UAE..· Imports slowed even before diversion of some Mideast Gulf/Asia shipments via southern Africa to avoid the Red Sea region..· Europe and US Group III base oils premium to vacuum gasoil extended its slide in Jan 2024 to lowest since H1 2022..· Sliding margins could incentivize refiners to trim output or to produce more Group II base oils instead.· Structurally, global Group III base oils supply remains more than sufficient to meet any shortfall versus demand.· Base oils prices continue to reflect that trend, rather than the prospect of a smaller supply surplus over the coming months..Global base oils - week of Jan 29: Price outlook - margins
· Global Group III base oils prices stayed unusually weak or extended their fall versus Group I/II prices and feedstock prices in January 2024.· Group III prices slumped versus VGO and other base oils grades from Q2 2023 in face of weak demand and plentiful supply.· Group III prices continue to reflect weak fundamentals in 2024 even as fundamentals show signs of changing over the coming months.· Demand remains weak at start of new year but faces prospect of seasonal boost in the coming months.· More competitive Group III prices versus Group I/II prices could add to any pick-up in demand.· Group III base oils supply is set to tighten over the coming months because of scheduled maintenance work at several plants in Europe and Asia.· The timing of the maintenance work is set to coincide with any seasonal pick-up in demand.· One of those plants is the largest source of South Korea’s Group III base oils supplies for the US.· South Korea’s share of US Group III base oils imports peaked in month of March in 2022 and 2023, coinciding with seasonal pick-up in demand..· That pattern could change in 2024 because of the scheduled maintenance work in South Korea from late Q1 2024.· Finland’s base oils exports of around 232,000t in the first ten months of 2023 already fell by more than 10pc from the same period in 2022, when scheduled plant maintenance work took place in Q4 that year..· Exports could face more pressure in H1 2024, when Neste’s Porvoo refinery is scheduled to be taken offline from April to June 2024 for scheduled maintenance..· Logistical issues and weak base oils margins could also impact supply.· Europe’s Group III base oils imports from the Mideast Gulf fell in Nov 2023 to second-lowest since May 2022 amid slump in shipments from Bahrain and UAE..· Imports slowed even before diversion of some Mideast Gulf/Asia shipments via southern Africa to avoid the Red Sea region..· Europe and US Group III base oils premium to vacuum gasoil extended its slide in Jan 2024 to lowest since H1 2022..· Sliding margins could incentivize refiners to trim output or to produce more Group II base oils instead.· Structurally, global Group III base oils supply remains more than sufficient to meet any shortfall versus demand.· Base oils prices continue to reflect that trend, rather than the prospect of a smaller supply surplus over the coming months..Global base oils - week of Jan 29: Price outlook - margins
