· US base oils price premium to VGO/heating oil continues to hold steady in narrow range.· Extension of trend would leave margins bottoming out earlier and higher this year than in Q1 2024.· Upcoming plant maintenance and seasonal rise in demand likely to curb pressure on refiners to seek outlets for surplus volumes.· Rangebound US export prices from end-2024 already point to signs of more limited pressure from surplus supply.· US Group II export-price discount to domestic prices stays narrower than in Q1 2024..· Narrower discount adds to signs of more limited pressure from surplus supply.· Ongoing shipment of supplies to markets like West Africa keeps supply at more manageable levels.· More limited surplus puts onus on overseas buyers to raise prices to make arbitrage feasible.· Wider CFR India Group II N500 premium to US export prices reflects that dynamic, with higher outright CFR India prices..· Fall in US exports to key markets in Africa in Dec 2024 adds to signs of more manageable surplus by year-end and early this year.· Fall in exports follows surge in shipments to Africa markets like Nigeria earlier in H2 2024.· Surge in shipments boosts US’ share of global exports to key Africa markets to more than 32% of total in Q3 2024 and Q4 2024, from less than 20% in H1 2024..· Surge in shipments over more extended period and from earlier in the year helps to limit volume of surplus to clear at year-end and early this year..· Latin America’s base oils supply could be tighter early this year, with more limited surplus carried over from end-2024.· Dynamic puts onus on regional refiners to maintain higher output.· Pick-up in exports from Argentina shows signs of extending through end-Feb 2025, providing regional buyers with additional source of Group I base oils.· Flow of arbitrage shipments from Asia to Latin America slows at start of 2025..· Slowdown in shipments from markets like South Korea leaves buyers in Latin America more reliant on supplies from US for premium-grade base oils..· US and Europe’s Group III base oils supplies from Asia could be lower in Feb 2025 after slump in South Korea’s exports to the two markets in Jan 2025..· Steep fall in shipments to both markets simultaneously is unusual.· Fall in shipments helps to cushion impact of seasonal slowdown in demand in both markets during winter months, curbing size of any supply-build.· Smaller supply-build would trigger earlier requirement for replenishment supplies.· Shipments from South Korea to US duly rise sharply in Feb 2025. .· Europe’s base oils supply could start to tighten amid seasonal pick-up in demand and smaller surplus to clear at start of the year. · Firm Group I export prices and closed arbitrage to outlets like India and Middle East add to signs of more limited surplus supply..· Europe’s Group II base oils supply shows signs of starting new year at lower-than-usual level following dip in imports at year-end.· Europe’s imports from markets producing Group II base oils fall to eight-month low in Dec 2024..· Slowdown cushions impact of regional output likely holding at firmer levels, especially vs same period a year earlier..· Europe’s Group III base oils supply could get support from signs of slowdown in shipments from Asia to the region at start of 2025.· Any slowdown would follow drop in Europe’s Group III base oils supply at end-2024..· Lower volume adds to drop in Europe’s Group III supply by 8% in 2024 from year earlier to lowest in more than five years..· Lower Group III supply contrasts with steadier Group I base oils supply and smaller drop in Group II supply in first eleven months of 2024.· Group III prices extend slide vs Group I/II base oils in 2024 and early this year even with larger fall in Group III supply.· Dynamic suggests Group III supply continues to exceed demand.· Dynamic suggests that Group III base oils market faces largest impact of Europe’s shrinking lube consumption..Americas/EMEA base oils demand outlook: Week of 24 Feb.Asia base oils supply outlook: Week of 24 Feb.Global base oils margins outlook: Week of 24 Feb.Global base oils arb outlook: Week of 24 Feb.Global base oils cargo flows: Week of 24 Feb.S Korea's Jan base oils exports fall to Americas, Europe.Europe Dec Grp III base oils supply falls
