Americas/EMEA base oils supply outlook: Week of 18 August

·         US Group II domestic base oils price-premium to feedstock prices holds steady in narrow range, even if down from year-earlier levels.

·         Steady margins could get additional support from any further drop in crude oil prices.

·         Steadier margins curb incentive for refiners to trim output.

·         Higher output and weak domestic demand likely to trigger rise in surplus supplies.

·         US base oils stocks typically rise in second half of the year, with pace of increase speeding up when net exports fall.

·         Typical drop in base oils output in first half of the year cushions impact of lower net exports during that period.

·         Steadier output in second half of the year removes that cushion.

·         US’ net base oils exports fall to nine-month low in June 2025, while output likely rose following completion of most plant-maintenance work.

·         Combination of higher output and lower net exports likely to trigger rise in US stocks.

·         Exports would need to remain at elevated levels or imports would need to fall over coming months to slow pace of rise in stocks.

·         US Group II heavy-grade base oils supply could stay at more manageable levels amid signs of increasingly feasible arbitrage opportunities to move additional supplies to Europe.

·         Widening US Group II heavy-grade discount to Europe prices contrasts with narrowing discount to CFR India prices.

·         Dynamic adds to incentive to move more supplies to Europe.

·         US Group I base oils supply shows mixed signals.

·         US exports to India rise in June 2025 and include Group I supplies.

·         US Group I brightstock cargo duly reaches India in July 2025.

·         Shipment helps to clear US market of surplus Group I supplies at end-Q2 2025.

·         Shipment also highlights existence of surplus Group I supplies even before seasonal slowdown in US market during third quarter.

·         US brightstock export-price maintains increasingly steep discount to CFR India price during Q3 2025.

·         Steep discount facilitates shipment of additional Group I supplies to India, curbing speed of any supply-build in US' domestic market.

·         Steep discount also points to prospect of pick-up in additional Group I supplies in US market.

·         Europe’s base oils supply likely to be readily available in face of weak regional demand.

·         Removal of any surplus volumes faces challenge of hard-to-work arbitrage and more competitive prices in other markets like US.

·         US Group II heavy-grade export-price maintains steep discount to Europe Group I SN 500 export-price, reflecting that dynamic.

·         Europe’s Group I base oils supply already gets boost from pick-up in Italy’s output at end-Q2 2025 following completion of plant-maintenance.

·         Similar dynamic likely to play out in other markets where Group I refineries underwent plant-maintenance work in recent months.

·         Europe’s Group I base oils supply gets further boost from resumption of flows from Turkey to the region.

·         Flows from Turkey point to sufficient domestic Group I supplies amid sustained flow of imports from Russia.

·         Flows from Turkey to Europe tap still-steep premium of domestic Europe Group I prices over Turkey's imported prices for supplies from Russia.

·         Steep price-premium sustains attraction for Turkey to boost Group I exports to Europe.

·         Europe’s Group II base oils supply likely to be readily available amid signs of healthy regional output and steady flows from US.

·         US base oils exports to Europe dip to six-month-low in June 2025.

·         Lower exports balance out rise in shipments in May 2025, remain in narrow range since start of 2025.

·         Europe’s Group II base oils heavy-grade prices especially stay unusually high vs Group I base oils, and vs Group II heavy-grade prices in US and Asia.

·         Sustained price-strength points to firm supply-demand fundamentals.

·         Sustained price-strength contrasts with persistent weakness of Group II heavy-grade prices and surplus supplies in US market.