Americas/Europe base oils - week of June 19: Supply outlook

·        US base oils supply surplus likely to be smaller heading into Q3; Europe’s Group I base oils supply likely to be balanced.

·        Diesel premium to crude extends gradual rise, stays low relative to 2022 levels, while base oils premium to diesel extends gradual fall.

·        Changing base oils and diesel price trends start to erode incentive for refiners to maximise base oils output.

·        Americas’ March base oils supply falls to two-year low – extending clear-out of surplus volumes from region and leaving market more balanced by end-Q2 2023.

·        Slump in Americas’ base oils supply in Q1 2023 fails to reverse downward pressure on outright prices in Q2 2023.

·        US base oils price premium to diesel extends recovery in Q2 2023, curbing incentive for refiners to cut output.

·        Wave of additional arbitrage shipments from US extends into June, reflecting lingering surplus.

·        Lower US base oils premium to diesel in June 2023, lower supply and wave of exports throughout Q2 2023 likely to cut surplus, leaving market more balanced by end-Q2 2023.

·        Smaller supply surplus and more competitive prices leave US market better placed ahead of likely slowdown in regional demand in Q3 2023.

·        US base oils imports rise to seven-month high in April – partially countering impact of surge in exports to clear surplus.

·        US’ Group III base oils imports surge at start of Q2 2023 despite weaker demand fundamentals.

·        Rise in shipments, despite weaker demand fundamentals, suggests moves to find outlets for more plentiful availability of Group III base oils.

·        Weaker US demand likely to slow pace of consumption of the supplies.

·        Fall in US imports of Group I/II base oils in April likely cut further the country’s surplus supply.

·        US base oils exports to Mexico stay unusually high in April, far outpace the Latin American country’s requirements for lube consumption.

·        Surge in flows suggests supplies are moving into Mexico’s fuel-extender market, permanently removing the volumes from base oils market.

·        Shipments add to rebalancing of US base oils market during Q2 2023.

·        Firm European prices relative to other regions suggests relatively tighter supply.

·        Extended plant maintenance and loss of Russian supplies set to limit any Group I supply surplus.

·        Tighter Group I supply boosts attraction for European blenders to consume more premium-grade base oils.

·        Europe’s premium-grade base oils supplies from Mideast Gulf stay rangebound at start of Q2 2023.

·        Europe’s premium-grade supplies from Europe/Mideast Gulf/Asia likely to hold firm through Q3 2023 amid weaker US prices, completion of plant maintenance work.

·        Premium-grade supplies to key global markets from Qatar hold steady in April, with rising volumes moving to US and Europe.