· US base oils prices rise versus crude oil/competing fuel prices.· Base oils margins rise because of slump in crude oil prices.· Base oils premium to VGO previously stayed in relatively narrow range even with round of plant maintenance work and at time of year when demand faces seasonal boost..· Rangebound margins so far this year pointed to sufficient supply to meet demand.· Sufficient supply suggests demand remained more muted than usual ahead of US tariffs announcement in early April 2025.· Demand could face further pressure following the tariffs announcement.· Exemption of base oils imports from US tariffs raises prospect of maintaining existing trade flows, limiting direct impact on supply from overseas markets.· For domestic supply, higher margins following slump in crude prices could incentivize refiners to maintain or raise output despite increasingly uncertain market outlook.· Any further demand weakness would follow structural changes in consumption that point to increasingly sufficient supply from domestic refiners even with planned or unexpected changes in production.· Healthy availability of supply partly reflects signs of waning domestic consumption of Group I/II base oils.· US’ firm base oils imports instead cover for rising consumption of Group III base oils as share of total US demand.· US imports as share of domestic demand rises to almost 80% of total consumption in Jan 2025, reflecting that trend..· Trend curbs requirements for supplies from US refiners, leaving growing surplus.· Trend likely to continue, especially with base oils imports exempted from US tariffs.· Several large shipments from South Korea and Middle East set to reach US in coming week, highlighting that dynamic.· Supply from overseas markets could still tighten in short-term because of scheduled maintenance work on Group III units in North America, Middle East and Asia during Q2 2025..· Tighter base oils supply in Brazil could provide opportunity for US refiners to move more shipments to that market.· Brazil’s base oils supply in the three months to February 2025 falls to lowest level in three years..· Unusually low supply precedes typical seasonal pick-up in demand from end of first quarter of the year.· Low supply could reflect domestic blenders’ preference to maintain lower stocks amid uncertainty about lube demand, economic outlook and impact of US tariffs.· Low supply could leave blenders with tighter-than-expected stocks if lube demand were to be firmer than expected.· Low supply suggests blenders are more comfortable with that risk than of maintaining higher stocks..· Europe’s base oils supply shows signs of staying more mixed, with more limited spot availability of Group I base oils, while plant maintenance could impact Group III base oils flows.· Firmer base oils margins following slump in crude oil prices incentivize refiners to boost production at the same time as US tariffs add to headwinds for Europe’s economic growth.· Europe’s Group I base oils supply rises to four-month high in Jan 2025..· Surge in Europe’s Group I exports to non-EU markets curbs size of supply-build.· Rise in exports mirrors typical trend at start of new year.· Europe’s steadier export prices this year break from trend of typical fall in prices during winter months to generate more arbitrage opportunities.· Similar fundamentals and diverging price trends point to spot shipments accounting for smaller-than-usual share of total exports in early-2025.· Similar fundamentals and diverging price trends coincide with stronger-than-usual Group I demand in markets like southeast Asia.· UK’s base oils exports account for 50% of Europe’s Group I exports to non-EU markets in Jan 2025..· UK’s export share already rises strongly in 2024.· Most of UK’s exports likely consist of term shipments.· Italy’s base oils exports account for around 30% of Europe’s Group I exports to non-EU markets in Jan 2025, with share dwindling through 2024.· Italy was previously a regular source of Group I spot cargoes..· Europe’s Group II base oils supply shows signs of pressure from more plentiful availability.· Europe Group II price-premium to US export prices falls in early-April 2025.· Europe Group II price-premium to Group I base oils also narrows in early-April 2025..· Group II premium to Group I narrows after holding relatively firm in Q1 2025.· Firm premium in Q1 2025 follows signs of tighter supply at start of 2025.· Europe’s Group II base oils supply, less Netherlands’ refinery consumption and its exports to non-EU markets, falls in Jan 2025 to levels that almost match year-earlier levels..· Base oils supply then shrinks further in Q1 2024 because of plant maintenance work.· Base oils supply by contrast likely rises in Q1 2025, especially vs year-earlier levels..· Europe’s Group III base oils supply could face tighter availability because of plant shutdowns in Middle East, North America and South Korea during Q2 2025.· All those markets are sources of Group III base oils for Europe..US’ January base oils supply rises.UK’s January base oils output rises.Netherlands' Jan base oils output holds firm.Asia base oils supply outlook: Week of 7 April
