· Rising US Group II base oils prices increase pressure to pass on higher costs to buyers in Europe, ICIS data shows.· Any such move would cut competitiveness of Europe Group II base oils versus Group III base oils.· Such a move could then trigger pick-up in European demand for Group III base oils.· Rising US Group II export prices in recent weeks contrast with steady Europe Group II prices.· Diverging trends squeeze US Group II export discount to domestic Europe Group II prices to narrowest in more than a year.· Rising US Group II domestic light-grade prices flip to premium to Europe Group II prices for first time in four months.· Trend increases pressure on US suppliers to boost prices for Europe-bound shipments and on Europe distributors to raise prices accordingly.· Any rise in Europe Group II prices would squeeze further their discount to prices for Group III supplies, especially for supplies with some or no OEM approvals..· Falling Europe Group III prices in recent months cut their premium to Europe Group II prices to narrowest this year.· Trend incentivized blenders to use more Group III base oils instead of Group II base oils.· Higher Europe Group II prices would narrow even more their discount to Group III base oils, adding to the attraction of using more Group III base oils.· US base oils shipments to Europe already fell in first seven months of 2023 in face of weak demand in that region and firmer buying interest in other markets like Latin America..· US producers may have less flexibility to sustain slowdown in shipments to Europe in face of seasonal slowdown in demand in US and Latin America in Q4 2023 and less workable arbitrage to other outlets..· Prospect of steady or higher US shipments to Europe would coincide with waning demand in the region and an already-narrow spread between its Group II and Group III prices.· Such a scenario increases attraction of maintaining more competitive Europe Group II prices versus Group III prices.· Such a scenario would leave US refiners absorbing higher feedstock costs rather than passing them onto buyers.· Such a scenario increases the attraction of refinery run-cuts over the coming months..Global base oils - week of Oct 2: Price outlook - margins
· Rising US Group II base oils prices increase pressure to pass on higher costs to buyers in Europe, ICIS data shows.· Any such move would cut competitiveness of Europe Group II base oils versus Group III base oils.· Such a move could then trigger pick-up in European demand for Group III base oils.· Rising US Group II export prices in recent weeks contrast with steady Europe Group II prices.· Diverging trends squeeze US Group II export discount to domestic Europe Group II prices to narrowest in more than a year.· Rising US Group II domestic light-grade prices flip to premium to Europe Group II prices for first time in four months.· Trend increases pressure on US suppliers to boost prices for Europe-bound shipments and on Europe distributors to raise prices accordingly.· Any rise in Europe Group II prices would squeeze further their discount to prices for Group III supplies, especially for supplies with some or no OEM approvals..· Falling Europe Group III prices in recent months cut their premium to Europe Group II prices to narrowest this year.· Trend incentivized blenders to use more Group III base oils instead of Group II base oils.· Higher Europe Group II prices would narrow even more their discount to Group III base oils, adding to the attraction of using more Group III base oils.· US base oils shipments to Europe already fell in first seven months of 2023 in face of weak demand in that region and firmer buying interest in other markets like Latin America..· US producers may have less flexibility to sustain slowdown in shipments to Europe in face of seasonal slowdown in demand in US and Latin America in Q4 2023 and less workable arbitrage to other outlets..· Prospect of steady or higher US shipments to Europe would coincide with waning demand in the region and an already-narrow spread between its Group II and Group III prices.· Such a scenario increases attraction of maintaining more competitive Europe Group II prices versus Group III prices.· Such a scenario would leave US refiners absorbing higher feedstock costs rather than passing them onto buyers.· Such a scenario increases the attraction of refinery run-cuts over the coming months..Global base oils - week of Oct 2: Price outlook - margins
