· Diesel premium to crude oil holds at lowest in more than a year.· Weak diesel premium contrasts with high base oils premium to diesel, incentivizing refiners to boost output of the lubricant feedstock.· Any additional rise in US base oils output raises prospect of adding to surplus supply.· US supply surplus likely to shrink on wave of arbitrage shipments to markets like India, upcoming plant maintenance later in Q2 2023, and firmer domestic demand.· US supply-surplus lingered into Q2 2023 even with drop in output in Q1 2023.· US base oils stocks barely fell in February even as plant maintenance work slashed output.· US producers previously cleared surplus supplies early in the year, giving them more leverage to raise prices in late Q1/Q2.· Large lingering surplus supply removed that leverage this time – highlighting importance of removing surplus volumes earlier in the year.· Signs of lower Latin America base oils production gives US producers opportunity to move more supplies to that region.· Brazil’s March base oils supply falls to thirteen-month low at same time as demand rises..· Argentina’s March base oils output falls to five-month low, increasing need for imports to make up shortfall.· Signs of ongoing arbitrage flows from Asia to Latin America curb benefit for US producers to plug shortfall.· Trend highlights ongoing impact of arbitrage flows from Asia to Latin America and need for longer-term strategic response by US producers. · Europe’s supply surplus clears faster than US surplus, leaving refiners with more leverage to target higher prices in Q2 2023.· Europe’s more balanced supply coincides with likely pick-up in demand to cover rising lube consumption.· Trend adds to refiners’ leverage over prices. · Drop in Europe base oils output in Q1 coincided with slump in prices that boosted overseas demand.· Drop in US base oils output in Q1 coincided with less competitive US prices, curbing overseas demand and slowing clear-out of surplus supplies.· Netherlands’ February base oils supply fell as imports dipped and output fell to eight-month low.· UK’s February base oils output fell to five-month low.· Lower supply added to regionwide fall in base oils output in February, curbing impact of weak demand and leaving market more balanced in Q2 2023.· Regional base oils prices started to stabilize in February, reflecting impact of dwindling supply surplus.· Europe’s Group II supply likely fell sharply in March at same time as demand began to revive.· Slowdown in European arbitrage shipments to markets like India/Mideast Gulf/Africa reflect more limited surplus supply.· Drop in European cargoes provides opportunity for US producers to target all those markets instead.· European producers will need to regain access to those outlets when supply surplus starts to build again..Americas/EMEA base oils - week of May 8: Demand outlook
· Diesel premium to crude oil holds at lowest in more than a year.· Weak diesel premium contrasts with high base oils premium to diesel, incentivizing refiners to boost output of the lubricant feedstock.· Any additional rise in US base oils output raises prospect of adding to surplus supply.· US supply surplus likely to shrink on wave of arbitrage shipments to markets like India, upcoming plant maintenance later in Q2 2023, and firmer domestic demand.· US supply-surplus lingered into Q2 2023 even with drop in output in Q1 2023.· US base oils stocks barely fell in February even as plant maintenance work slashed output.· US producers previously cleared surplus supplies early in the year, giving them more leverage to raise prices in late Q1/Q2.· Large lingering surplus supply removed that leverage this time – highlighting importance of removing surplus volumes earlier in the year.· Signs of lower Latin America base oils production gives US producers opportunity to move more supplies to that region.· Brazil’s March base oils supply falls to thirteen-month low at same time as demand rises..· Argentina’s March base oils output falls to five-month low, increasing need for imports to make up shortfall.· Signs of ongoing arbitrage flows from Asia to Latin America curb benefit for US producers to plug shortfall.· Trend highlights ongoing impact of arbitrage flows from Asia to Latin America and need for longer-term strategic response by US producers. · Europe’s supply surplus clears faster than US surplus, leaving refiners with more leverage to target higher prices in Q2 2023.· Europe’s more balanced supply coincides with likely pick-up in demand to cover rising lube consumption.· Trend adds to refiners’ leverage over prices. · Drop in Europe base oils output in Q1 coincided with slump in prices that boosted overseas demand.· Drop in US base oils output in Q1 coincided with less competitive US prices, curbing overseas demand and slowing clear-out of surplus supplies.· Netherlands’ February base oils supply fell as imports dipped and output fell to eight-month low.· UK’s February base oils output fell to five-month low.· Lower supply added to regionwide fall in base oils output in February, curbing impact of weak demand and leaving market more balanced in Q2 2023.· Regional base oils prices started to stabilize in February, reflecting impact of dwindling supply surplus.· Europe’s Group II supply likely fell sharply in March at same time as demand began to revive.· Slowdown in European arbitrage shipments to markets like India/Mideast Gulf/Africa reflect more limited surplus supply.· Drop in European cargoes provides opportunity for US producers to target all those markets instead.· European producers will need to regain access to those outlets when supply surplus starts to build again..Americas/EMEA base oils - week of May 8: Demand outlook