Americas/EMEA base oils supply outlook: Week of 5 May

·         US base oils prices extend rise vs feedstock/competing fuel prices.

·         Rising base oils margins point to supply-demand fundamentals that are firm enough to support the higher price differentials.

·         Supply fundamentals likely to be tighter in early Q2 2025 amid heavy round of plant maintenance work in North America.

·         Plant maintenance work follows slump in US base oils output to four-year low in Feb 2025.

·         Size of drop in output points to run-cuts, plant maintenance work and/or production issues at multiple plants.

·         Output in some US districts stays lower than usual for extended period, pointing to ongoing production issues.

·         Trend suggests output in those districts could continue to stay lower until those issues are resolved.

·         Slump in output in Feb 2025 complicates any plans to build stocks ahead of round of scheduled maintenance work from March 2025.

·         Slump in output in Feb 2025 and plant maintenance work from March 2025 likely cuts volume of surplus supplies, curbing refiners’ need to clear lingering volumes through overseas markets.

·         That dynamic could change as plant maintenance draws to a close over coming weeks.

·         US Group II light-grade price differential to prices in markets like India strengthens further.

·         Rising US Group II premium to CFR India price points to more limited surplus supply for now, especially of light grades.

·         Slump in US base oils imports in Feb 2025 compounds drop in US base oils supply.

·         US imports shows signs of improving in March-April 2025 amid pick-up in flows from Middle East and South Korea.

·         Higher imports and lower domestic output raises prospect of rise in availability of Group III base oils, tighter availability of Group II base oils.

·         US imports show signs of slowing in May 2025.

·         US/Europe imports of premium-grade base oils from Middle East could get boost if pick-up in shipments from Middle East to Asia in Q1 2025 proves to be temporary, with more supplies instead moving to US/Europe.

·         Rise in supplies bound for Asia in Q1 2025 also highlights rebound in shipments from Qatar.

·         Rebound in imports follows unusual slump in shipments from Qatar at end-2024, points to resumption of more regular flows from the supplier.

·         US/Europe/Asia premium-grade imports from UAE slide in Feb 2025 for second time in three months.

·         Drop in shipments precedes expected plant maintenance in UAE in Q2 2025.

·         Drop in shipments could point to moves to build stocks ahead of maintenance work.

·         Even so, several shipments from UAE reach US in March 2025 and April 2025.

·         Europe’s base oils supply could tighten because of recent and upcoming plant maintenance work in the region and in markets that supply Europe.

·         Any temporary shutdown of base oils units in Spain because of last week’s power-outage would tighten supply further.

·         Even if shutdowns are brief, refineries can face additional unexpected issues as units are brought back online.

·         Europe’s Group I base oils supply likely to stay limited during Q2 2025 amid steady demand, plant maintenance work and smaller surplus carried over from Q1 2025.

·         Europe’s Group I base oils supply falls to one-year low in Feb 2025 amid combination of lower output and imports and plant maintenance work.

·         Lower supply cushions impact of seasonal slowdown in demand, curbs term and spot volumes available for export.

·         Lower volumes for export squeeze supply for buyers in markets like Nigeria and Singapore.

·         Europe’s Group I supply, less exports, holds in narrow range in Feb 2025 for third month.

·         Steady supply suggests the volume is reflective of Europe’s typical monthly Group I requirements.

·         Regional requirements typically rise above that level around beginning of spring-time.

·         Dynamic suggests any pick-up in exports to other markets partly depends on size of surplus volume above those regional requirements.

·         Europe’s Group II base oils supply faces less disruption from ongoing plant maintenance in overseas markets like US.

·         Group II supply would face more disruption from plant maintenance work in Europe.

·         Europe’s Group II supply slumped in H1 2024 because of plant-maintenance work in the region.

·         Maintenance work coincided with seasonal rise in demand in H1 2024.

·         Impact of any plant maintenance work over coming months would depend on its timing and length, and whether it involved partial or full shutdown.

·         Europe’s Group III base oils supply could be more mixed.

·         Arrival in Europe of Group III cargoes from Middle East shows signs of reviving in H2 May 2025 after slowing in April 2025.

·         Slowdown in shipments coincides with plant maintenance work in Middle East.

·         Slowdown in shipments would contrast with pick-up in shipments of premium-grade base oils from Spain in April 2025, including steady flows to northwest Europe.

·         Europe’s Group III 4cSt (low) price discount to 4cSt (high) price narrows in H2 April 2025 after widening steadily over past two years.

·         Narrower discount could reflect balanced-to-tighter availability of supplies without full set of OEM approvals.