· Diesel prices stay unusually firm vs crude oil.· Trend incentivizes refiners to focus on maximising middle distillates output rather than base oils.· Some base oils plant maintenance work in US ends in recent weeks; additional maintenance work expected to take place in coming months in the US and Latin America.· Any unexpected supply disruptions are most likely to happen over the next two months, when storm activity typically peaks during the Atlantic hurricane season..· Americas’ May base oils supply rises to one-year high, raising prospect of build-up of surplus volumes if arbitrage shuts, like last year..· Arbitrage from US stays open through early Q3 2023, and shut from other markets, curbing prospect of repeat of last year’s build-up of surplus volumes..· US’ June base oils imports slump to two-year low as Mideast Gulf Group III shipments target other markets..· Closed arbitrage also curbs flow of Group II shipments from Asia to US, contrasting with 2H 2022.· US’ June net base oils exports fall from May, still third highest since Q1 2022..· US’ high net exports speed up drawdown in country's base oils stocks, with trend likely continuing into Q3 2023.· US’ high net exports balance out weaker-than-usual domestic demand, highlight benefit of competitive export prices to clear persistent surplus..· Brazil’s base oils surplus of supply over demand rises in Q2 2023 from Q1 on pick-up in imports.· Brazil’s Q2 2023 surplus stays lower than usual, reflecting balanced supply-demand fundamentals ahead of plant maintenance in the country in 2H 2023..· Europe’s Group I base oils supply shows signs of avoiding any large build-up of surplus volumes in Q3 2023.· More balanced supply reflects impact of plant maintenance, loss of Russian supplies, steady removal of surplus volumes to Africa. · Europe’s Group II supply faced slowdown in arrival of shipments from US at start of Q3 2023, followed by signs of recovery in flows to region in Aug 2023.· Europe’s Group III supply shows signs of rising in Q3 2023 following completion of regional plant maintenance work and as more Mideast Gulf shipments move to region..· Europe’s May base oils supply falls close to lowest in a year, reflecting seasonal round of maintenance work.· Group I supply likely stayed lower in June and into Q3 2023 in face of extended plant maintenance work..· UK’s June base oils exports surge to three-year high, still avoid triggering any major supply-build in Europe.· Wave of exports to African markets help to reverse supply-build in UK..· Wave of shipments taps strong demand in Africa for Group I base oils, and slump in supplies from Russia to the region.· UK’s July base oils exports show signs of falling back to more typical levels..· Mideast Gulf base oils supply gets boost from surge in arbitrage shipments from South Korea in July..· Shipments highlight rising demand for Group II base oils in Mideast Gulf, US arbitrage shipments moving more to India rather than Mideast Gulf, and closed arbitrage from Europe.· Shipments to Mideast Gulf highlight Asia refiners’ diversification away from China..Global base oils - week of Aug 21: Price outlook - margins
