· US base oils prices slip versus feedstock prices at a time of year when they typically rise.· Dynamic highlights how lower crude/VGO prices in Q2 2025, rather than higher base oils prices, are key factor supporting higher base oils margins.· Any further drop in base oils margins would point to weakening supply-demand fundamentals.· Supply fundamentals could face further upward pressure as more US plant maintenance draws to a close.· US heavy-grade base oils supply already shows signs of increasingly healthy availability.· US domestic Group II heavy-grade price weakens relative to light grades and relative to export prices..· Weaker domestic heavy-grade price could incentivize refiners to focus on producing more light grades instead.· Weaker domestic heavy-grade price could put more downward pressure on heavy-grade export price.· Open arbitrage to outlets like India could help to limit any build-up of heavy-grade supplies..· Closed arbitrage for US light grades to markets like India reflects that product’s tighter availability.· Closed arbitrage could complicate removal of light-grade supplies if surplus volumes started to build.· Weaker heavy-grade price increases importance of maintaining firm light-grade prices, and balanced-to-tight supply fundamentals that support those prices..· Latin America’s base oils supply likely to last longer in face of more muted lube consumption.· US base oils exports to South America rebound to five-month high in March 2025 after sustained dip in shipments..· Surge in shipments helps to keep total US exports at elevated level in March 2025, and to replenish depleted stocks in South America.· Surge in shipments curbs pressure on US refiners to target arbitrage outlets like West Africa and India.· Signs of weaker lube demand in South America could limit a more extended pick-up in US exports to the region.· Any subsequent slowdown in shipments to South America would revive pressure on refiners to line up more supplies to outlets like West Africa.· Any such moves would require US export prices that facilitate such shipments..· Europe’s base oils supply likely to stay more mixed.· Europe’s steady Group II base oils supply could boost its attraction relative to Group I base oils. · US base oils exports to Europe hold in narrow range in March 2025 for third month, even with plant maintenance work in US..· Steady exports reflects diverse number of supply sources in US, cushioning impact of change in flows from any one of the sources.· Steady exports to Europe also reflect moves to avoid moving surplus US volumes to that market, and moving those shipments to other outlets instead..· Steady flows raise prospect of steadier, even if higher prices in Europe, easing buyers’ concern about exposure to price volatility..· Europe Group II light-grade price premium to US domestic price falls in mid-May 2025 to lowest in more than a month..· Any extension of trend could curb attraction of moving more light-grade base oils to Europe..· Europe’s Group I base oils supply likely to stay tighter because of plant maintenance throughout H1 2025.· Europe’s shrinking number of base oils plants magnifies impact of the maintenance work.· Italy’s Group I base oils output pauses in March 2025 for first time in more than a decade, reflecting impact of plant maintenance work..· Pause in output highlights impact of last year’s plant closure, leaving Italy’s supply reliant on just one remaining Group I unit.· Pause in output contrasts with ongoing demand for Group I base oils, triggering slump in Italy’s base oils stocks in March 2025..· Italy heads into peak-demand period in Q2 2025 with unusually low stocks.· Italy’s low stocks complicate regional buyers’ ability to line up alternative supplies during maintenance work on other plants in Europe during Q2 2025. .· Europe’s Group III base oils supply set to get boost from arrival of several shipments from different sources in the Middle East and from southeast Asia in H2 May 2025.· Europe Group III base oils prices stay unusually competitive relative to other grades, even with plant maintenance work in the Middle East..· Narrow Group III price-differential points to sufficient volumes to balance out impact of drop in supply because of plant maintenance work.· Signs of sufficient volumes, even during plant maintenance work, mirror similar dynamic for Group II base oils. .Latin America March lube demand falls.Americas/EMEA base oils demand outlook: Week of 19 May.Asia base oils supply outlook: Week of 19 May.Global base oils margins outlook: Week of 19 May
