· US Group II base oils price-premium to feedstock/competing fuel prices stays in narrow range, increasingly lags year-earlier levels..· Base oils margins hold at levels that sustain incentive to maintain steady output.· Base oils prices hold at levels that facilitate removal of surplus supplies in overseas markets.· Open arbitrage helps to avoid build-up of surplus supplies, supporting steady margins. .· Any rise in surplus supplies in US market could attract firm buying interest in outlets facing tighter supplies, such as Latin America and India..· Such a dynamic already shows signs of taking place.· US Group II heavy-grade export price-discount to CFR India price widens.· US Group II light-grade export-price premium to CFR India price slips to narrowest level in more than two months..· Firmer CFR India Group II prices relative to US prices facilitate pick-up in flows to that market.· Lack of arbitrage shipments from Asia to Latin America adds to opportunity for US to clear surplus volumes in that market.· South Korea’s base oils exports to Latin America fall to multi-year low in June 2025, reflecting that dynamic..· US Group III supply could stay lower than usual in July-Aug 2025.· Weak Group III prices suggest supply remains sufficient even at lower levels.· South Korea’s base oils exports to US recover in June 2025 even with Group III plant-maintenance work in the northeast Asian country that month..· Rise in exports helps to cushion signs of slowdown in shipments from Middle East to US at end-Q2 2025.· Rise in exports could expand further South Korean refiners’ share of US Group III base oils market.· Supplies from South Korea account for more than 40% of US Group III imports in May 2025, vs less than 10% share for supplies from Bahrain and UAE..· Share of supplies from those different sources had been more similar in first four months of 2025.· Weak US Group III base oils prices suggest supply remains sufficient even with recent round of plant-maintenance in Middle East and Asia.· Supply remains sufficient even with US’ reliance on Middle East and South Korea for most of its Group III base oils requirements. · US' reliance on those markets for most of its Group III supplies magnifies impact of any change in shipments from those regions.· US’ reliance on Middle East and South Korea contrasts with Europe, whose Group III supplies originate from larger number of sources..· Both US and Europe see fall in Group III base oils imports from Middle East in May 2025, reflecting impact of plant-maintenance in that region.· But US’ total Group III supplies slide in May 2025 because of drop in shipments from Middle East..· Europe's total Group III supply by contrast holds steady in May 2025 despite fall in shipments from Middle East..· Europe’s own base oils supply likely to rise in coming weeks as completion of plant-maintenance work coincides with slowdown in regional demand.· Supply could get further boost from open arbitrage to move Group II base oils to Europe from Asia or US.· Supply could get further boost from closed arbitrage to move surplus Group I supplies from Europe to other markets.· Open arbitrage to move more premium-grade supplies to Europe follows pick-up in Europe’s imports from producers of Group II base oils to seven-month high in May 2025..· Europe’s Group I base oils supply for overseas markets could start to rise in response to recovery in output and drop in regional demand.· Rise in supply would follow slump in Europe’s Group I exports to overseas markets in May 2025 for third time in four months from year-earlier levels.· Sustained contraction cuts Europe’s Group I exports to multi-year low in Jan-May 2025..· Any recovery in surplus Group I supply in Q3 2025, and need to clear that surplus, could face challenge with Europe Group I export prices at firm levels relative to overseas markets..· Europe’s Group III base oils supply could get boost from pick-up in shipments from Asia and signs of recovery in flows from Spain.· South Korea’s base oils exports to Belgium and Netherlands combined rise to four-month high in June 2025..· Rise in supplies from South Korea to Europe could cushion impact of signs of slowdown in arrival of shipments from Middle East in July 2025.· Supplies from Asia already help to cushion impact of slowdown in shipments from Middle East in May 2025..· Supplies from Middle East could start to recover in coming weeks following completion of Group III plant-maintenance in the region.· Cargo of Group III base oils from UAE set to reach northwest Europe in early-Aug 2025 after loading around H2 June 2025.· Recent pick-up in shipments from UAE points to resumption of normal flows following completion of plant-maintenance work..S Korea June base oils exports to US rise.Europe’s May Group III base oils supply holds firm.Latin America’s May lube demand rises.Americas/EMEA base oils demand outlook: Week of 21 July.Global base oils margins outlook: Week of 21 July.Global base oils arb outlook: Week of 21 July
