· Diesel premium to crude oil extends rise to highest since Q1 2023, to levels well above pre-2022 levels.· Strong diesel premium to crude, and sliding base oils premium to diesel, incentivizes refiners to cut base oils output.· Light-grade base oils supply could tighten more as refiners redirect supplies back into diesel pool.· Any moves to boost diesel or cut base oils output would cushion impact of pause in scheduled plant maintenance work in US over coming weeks.· Weak base oils margins could incentivize Europe refiners to extend maintenance work affecting several plants.· European supply could get boost from signs of pick-up in flows from Turkey.· US’ May base oils supply extends rebound to seven-month high following completion of plant maintenance work..· Rise in supply in May increases importance of sustaining open arbitrage and large exports to overseas markets to counter weak domestic demand.· US arbitrage shipments to markets like Africa and India continue through June and July.· Steady arbitrage shipments point to ongoing surplus, and rapid removal of some of the surplus.· Rise in May supply coincides with firmer base oils margins in Q2 2023; slump in margins in Q3 2023 cut incentive to maintain high output..· Argentina continues to rely mostly on imports to cover base oils requirements in Q2 2023.· Almost all its imports originate from US in Q2 2023, contrasting with lower share in Q1 2023..· Trend reflects closed arbitrage from Europe and Asia and competitive US prices in Q2 2023.· Trend likely to continue in Q3 2023, with US prices still competitive, Europe prices uncompetitive and Asia prices less competitive than last year..· Netherlands’ lower base oils supply in May falls below typical levels, partially balancing out surge in supplies in April..· Still-competitive US Group II prices versus Europe prices raise prospect of larger-than-usual shipments to the region.· Trend would keep pressure on Netherlands’ base oils supply to stay lower to avoid supply-build during seasonal slowdown in demand during Q3 2023.· Netherlands’ May base oils supply includes unusually large volume of Group III base oils from Mideast Gulf and southeast Asia.· Repeat of those flows would be more problematic in Q3 2023 following restart of Group III base oils unit in Spain in June 2023.· Netherlands’ May base oils supplies include steady, even if low, volumes from China..· Before March 2023, Netherlands had previously imported almost no base oils from China.· Any extension or expansion of that trend would be structural change that would impact other more established supplies..· UK’s May base oils supply rises to highest since Q4 2020, even amid weak domestic and regional lube demand..· Rising supply includes pick-up in Group I base oils output at a time when Europe and Africa are seeking to cover for loss of supplies from Russia.· Rising Group I base oils output taps firm regional Group I base oils prices in Q2 2023, especially relative to export prices.· Rising Group I base oils output coincides with/cushions impact of drop in Group I output in Italy.· Rising Group I base oils output reflects widespread repercussions of change in trade flows and production plans to cover demand..· UK’s May base oils surplus of supply over demand rises to highest since 2018..· Surplus likely to consist more of premium grades than Group I base oils.· UK’s rising base oils surplus in Q2 2023 likely to be harder to clear in Q3 2023 when demand faces typical seasonal slowdown.· Any lingering surplus could add to slowdown in demand, put more pressure on prices..· Group III base oils exports from Spain rebound in July to four-month high..· Wave of premium-grade shipments from Mideast Gulf and Asia cushion fall in exports from Spain during plant-maintenance in May-June.· Shipments from Mideast Gulf and Asia will need to fall, following resumption of normal exports from Spain in July, to avoid oversupply of Group III base oils in Europe..Global base oils - week of Aug 7: Price outlook - margins
· Diesel premium to crude oil extends rise to highest since Q1 2023, to levels well above pre-2022 levels.· Strong diesel premium to crude, and sliding base oils premium to diesel, incentivizes refiners to cut base oils output.· Light-grade base oils supply could tighten more as refiners redirect supplies back into diesel pool.· Any moves to boost diesel or cut base oils output would cushion impact of pause in scheduled plant maintenance work in US over coming weeks.· Weak base oils margins could incentivize Europe refiners to extend maintenance work affecting several plants.· European supply could get boost from signs of pick-up in flows from Turkey.· US’ May base oils supply extends rebound to seven-month high following completion of plant maintenance work..· Rise in supply in May increases importance of sustaining open arbitrage and large exports to overseas markets to counter weak domestic demand.· US arbitrage shipments to markets like Africa and India continue through June and July.· Steady arbitrage shipments point to ongoing surplus, and rapid removal of some of the surplus.· Rise in May supply coincides with firmer base oils margins in Q2 2023; slump in margins in Q3 2023 cut incentive to maintain high output..· Argentina continues to rely mostly on imports to cover base oils requirements in Q2 2023.· Almost all its imports originate from US in Q2 2023, contrasting with lower share in Q1 2023..· Trend reflects closed arbitrage from Europe and Asia and competitive US prices in Q2 2023.· Trend likely to continue in Q3 2023, with US prices still competitive, Europe prices uncompetitive and Asia prices less competitive than last year..· Netherlands’ lower base oils supply in May falls below typical levels, partially balancing out surge in supplies in April..· Still-competitive US Group II prices versus Europe prices raise prospect of larger-than-usual shipments to the region.· Trend would keep pressure on Netherlands’ base oils supply to stay lower to avoid supply-build during seasonal slowdown in demand during Q3 2023.· Netherlands’ May base oils supply includes unusually large volume of Group III base oils from Mideast Gulf and southeast Asia.· Repeat of those flows would be more problematic in Q3 2023 following restart of Group III base oils unit in Spain in June 2023.· Netherlands’ May base oils supplies include steady, even if low, volumes from China..· Before March 2023, Netherlands had previously imported almost no base oils from China.· Any extension or expansion of that trend would be structural change that would impact other more established supplies..· UK’s May base oils supply rises to highest since Q4 2020, even amid weak domestic and regional lube demand..· Rising supply includes pick-up in Group I base oils output at a time when Europe and Africa are seeking to cover for loss of supplies from Russia.· Rising Group I base oils output taps firm regional Group I base oils prices in Q2 2023, especially relative to export prices.· Rising Group I base oils output coincides with/cushions impact of drop in Group I output in Italy.· Rising Group I base oils output reflects widespread repercussions of change in trade flows and production plans to cover demand..· UK’s May base oils surplus of supply over demand rises to highest since 2018..· Surplus likely to consist more of premium grades than Group I base oils.· UK’s rising base oils surplus in Q2 2023 likely to be harder to clear in Q3 2023 when demand faces typical seasonal slowdown.· Any lingering surplus could add to slowdown in demand, put more pressure on prices..· Group III base oils exports from Spain rebound in July to four-month high..· Wave of premium-grade shipments from Mideast Gulf and Asia cushion fall in exports from Spain during plant-maintenance in May-June.· Shipments from Mideast Gulf and Asia will need to fall, following resumption of normal exports from Spain in July, to avoid oversupply of Group III base oils in Europe..Global base oils - week of Aug 7: Price outlook - margins