Americas/EMEA base oils supply outlook: Week of 23 June

·         US base oils prices fall relative to feedstock/competing fuel prices following recent surge in crude oil prices.

·         Dip in US export price-premium to vacuum gasoil in June 2025 contrasts with sustained surge of price-premium in Q2-Q3 2024.

·         Weaker price-premium points to softer supply-demand fundamentals at end-Q2 2025 compared with year earlier.

·         Rise in outright Group II export prices cushions size of drop in base oils margins.

·         Rise in outright Group II export prices points to tighter supply, curbing need to keep open the arbitrage to markets like Africa and India.

·         Rise in outright Group II export prices coincides with easing supply-tightness in other regions like Asia.

·         Rise in outright export prices precedes seasonal slowdown in demand in most markets.

·         Dynamic likely to limit any pressure on prices in destination markets like India to rise to keep arbitrage open.

·         A less feasible arbitrage could trigger faster rise in surplus supplies in US, combined with fewer outlets to clear those supplies.

·         US Group III base oils supply could stay tighter at least until start of Q3 2025 amid slowdown in shipments from South Korea and Middle East.

·         South Korea’s base oils exports to US fall to four-month low in May 2025.

·         Fall in shipments coincides with Group III plant-maintenance work in South Korea in May-June 2025.

·         Group III plant-maintenance work in Middle East in Q2 2025 complicates ability for US importers to boost supplies from that market to cover for slowdown from South Korea.

·         Any disruption or delay in Group III base oils shipments from Middle East in coming weeks would leave US supply tighter for longer.

·         Latin America’s base oils supply switches from tightness early this year to surplus in Q2 2025.

·         Latin America’s base oils supply holds close to 21-month high in April 2025, after staying lower than usual in early-2025.

·         Higher supply and weaker lube demand leaves Latin America facing large surplus in April 2025 for second month.

·         Surplus supplies help to replenish stocks that tightened early this year.

·         Any extension of surplus supplies, amid shrinking demand and replenished stocks, could put pressure on regional output or on prices to incentivize drop in supply.

·         Europe’s Group I base oils supply likely to be more readily available in coming weeks as round of plant-maintenance work in H1 2025 draws to a close.

·         Europe’s Group I base oils exports to markets outside the region already recover to three-month high in April 2025.

·         Exports rise as surge in shipments from UK counter slump in supplies from Italy.

·         Exports rise even during/ahead of plant-maintenance work, pointing to more-than-sufficient volumes to cover regional demand at time of year when fundamentals are tight.

·         Europe’s Group II base oils supply likely to be readily available amid healthy regional output and steady shipments from US in Q2 2025.

·         Europe’s imports from key sources of Group II base oils fall to three-month low in April 2025, coinciding with round of plant-maintenance and seasonal rise in demand in US at start of Q2 2025.

·         Rise in US exports to Europe in April 2025, and Europe’s increasingly firm Group II base oils prices relative to other regions, likely to sustain sufficient supplies in the region.

·         Europe’s Group III base oils supply could face disruption if Israel-Iran war starts to impact shipments from the Middle East region.

·         Concern about any such disruptions could anyway incentivize buyers to eye supplies from other sources instead.

·         Europe’s Group III base oils imports from Middle East hold steady in April 2025 in narrow range for third month.

·         Firm volumes, and Europe’s high share of Group III supplies originating from Middle East, highlight its exposure to any supply disruptions in that region.

·         Any drop in flows from Middle East would coincide with pause in premium-grade shipments from Spain since early-June 2025.