· Diesel price premium to crude oil prices corrects lower after sustained surge from early July.· Diesel premium to crude stays well above Feb-June 2023 levels, and well above typical levels.· Firm diesel premium to crude and weakening base oils premium to diesel/VGO incentivizes run-cuts/extension of plant shutdowns.· Squeezed margins likely to have biggest impact on light-grade base oils supplies.· Low margins and wide gap between domestic and export base oil prices incentivize refiners to produce sufficient supply to meet term commitments only.· Lack of any moves to trim output could trigger rise in US Group II base oils supply.· Signs of less workable arbitrage from US to markets like India could increase impact of any such rise in supply.· Expected plant maintenance in Americas in coming weeks set to mostly affect Group I base oils.· Repeated extension of plant shutdown in Italy raises uncertainty about timing of restart.· Any imminent restart of plant would likely boost supply in few weeks’ time, raise prospect of surplus supply during final weeks of year. .· US plant maintenance triggers resumption of fall in US’ base oils/lube output in June.· Drop in output coincides with fall in base oils imports, cutting US base oils supply in June to third-lowest since early 2021..· Drop in supply leaves US refiners better positioned to manage seasonal slowdown in demand during Q3 2023..· Argentina’s July base oils supply rises to eighteen-month high on rebound in domestic production..· Higher domestic base oils output boosts Group I supplies, covers for closed arbitrage from Europe and Mideast Gulf.· Argentina’s higher base oils supply contrasts with slowing domestic lube demand, raising prospect of supply-build and either a drop in domestic output or slowdown in requirements for overseas supplies.· Argentina’s Group I requirements likely to sustain minimum domestic base oils output levels.· Any slowdown in supply more likely to focus more on premium-grade supplies from overseas markets..· Netherlands’ June base oils supply edges up from May, extends sharp fall from year-earlier levels as imports slump..· Netherlands’ supply-surge in 1H 2022 weighed on markets through rest of last year, with weak demand compounding impact of overhang.· More balanced supply in 1H 2023 raises prospect of avoiding repeat of same scenario in 2H 2023..· Singapore takes delivery of more shipments from Netherlands in July and August, after pause in such flows since February..· Shipments move to Singapore despite closed arbitrage from Europe to Asia.· Shipments could reflect moves to maintain supply-demand balance in Europe market..· Spain’s June base oils supply falls to two-year low as dip in Group I output coincides with Group III plant maintenance work..· Drop in Group I supply coincides with slump in Italy’s Group I base oils output, raising prospect of tighter-than-usual supplies in Mediterranean market in Q3 2023..· UK’s June base oils output falls to fifteen-month low, reversing recent surge in country’s supply in April and May..· Firm base oils imports cushion’s UK’s drop in June supplies amid surge in shipments from Netherlands.· Trend helps to absorb more supplies from Netherlands and cut surplus supply in both markets ahead of seasonal slowdown in demand in Q3 2023..· Group III base oils supplies from Mideast Gulf extend rise in Q2 2023 at same time as demand ebbs..· Asia market absorbs growing share of Mideast Gulf Group III supplies in Q2 2023, amid weaker prices in Europe/US.· Trend less likely to extend through Q3 2023 as Asia Group III prices fall relative to Europe/US prices..Global base oils - week of Sep 4: Price outlook - arbitrage
· Diesel price premium to crude oil prices corrects lower after sustained surge from early July.· Diesel premium to crude stays well above Feb-June 2023 levels, and well above typical levels.· Firm diesel premium to crude and weakening base oils premium to diesel/VGO incentivizes run-cuts/extension of plant shutdowns.· Squeezed margins likely to have biggest impact on light-grade base oils supplies.· Low margins and wide gap between domestic and export base oil prices incentivize refiners to produce sufficient supply to meet term commitments only.· Lack of any moves to trim output could trigger rise in US Group II base oils supply.· Signs of less workable arbitrage from US to markets like India could increase impact of any such rise in supply.· Expected plant maintenance in Americas in coming weeks set to mostly affect Group I base oils.· Repeated extension of plant shutdown in Italy raises uncertainty about timing of restart.· Any imminent restart of plant would likely boost supply in few weeks’ time, raise prospect of surplus supply during final weeks of year. .· US plant maintenance triggers resumption of fall in US’ base oils/lube output in June.· Drop in output coincides with fall in base oils imports, cutting US base oils supply in June to third-lowest since early 2021..· Drop in supply leaves US refiners better positioned to manage seasonal slowdown in demand during Q3 2023..· Argentina’s July base oils supply rises to eighteen-month high on rebound in domestic production..· Higher domestic base oils output boosts Group I supplies, covers for closed arbitrage from Europe and Mideast Gulf.· Argentina’s higher base oils supply contrasts with slowing domestic lube demand, raising prospect of supply-build and either a drop in domestic output or slowdown in requirements for overseas supplies.· Argentina’s Group I requirements likely to sustain minimum domestic base oils output levels.· Any slowdown in supply more likely to focus more on premium-grade supplies from overseas markets..· Netherlands’ June base oils supply edges up from May, extends sharp fall from year-earlier levels as imports slump..· Netherlands’ supply-surge in 1H 2022 weighed on markets through rest of last year, with weak demand compounding impact of overhang.· More balanced supply in 1H 2023 raises prospect of avoiding repeat of same scenario in 2H 2023..· Singapore takes delivery of more shipments from Netherlands in July and August, after pause in such flows since February..· Shipments move to Singapore despite closed arbitrage from Europe to Asia.· Shipments could reflect moves to maintain supply-demand balance in Europe market..· Spain’s June base oils supply falls to two-year low as dip in Group I output coincides with Group III plant maintenance work..· Drop in Group I supply coincides with slump in Italy’s Group I base oils output, raising prospect of tighter-than-usual supplies in Mediterranean market in Q3 2023..· UK’s June base oils output falls to fifteen-month low, reversing recent surge in country’s supply in April and May..· Firm base oils imports cushion’s UK’s drop in June supplies amid surge in shipments from Netherlands.· Trend helps to absorb more supplies from Netherlands and cut surplus supply in both markets ahead of seasonal slowdown in demand in Q3 2023..· Group III base oils supplies from Mideast Gulf extend rise in Q2 2023 at same time as demand ebbs..· Asia market absorbs growing share of Mideast Gulf Group III supplies in Q2 2023, amid weaker prices in Europe/US.· Trend less likely to extend through Q3 2023 as Asia Group III prices fall relative to Europe/US prices..Global base oils - week of Sep 4: Price outlook - arbitrage