Americas/EMEA base oils supply outlook: Week of 7 July

·         US base oils supply could stay tighter at start of Q3 2025 after plant-maintenance work in domestic and overseas markets cuts availability in Q2 2025.

·         US base oils supply lags demand in April 2025 for third month, cutting stocks to eight-month low.

·         Persistent supply-shortfall triggers fastest drop in stocks over three-month period since September 2020, when US was in midst of Covid-related supply disruptions.

·         Plant-maintenance work in May-June 2025 likely keeps output lower than usual through rest of Q2 2025.

·         Plant-maintenance work in Middle East and Asia in Q2 2025 coincides with signs of slowdown in shipments reaching US in May-July 2025.

·         Lower output and imports could push back any recovery in base oils supply until several weeks into Q3 2025.

·         US Group II export prices show diverging signals, with firm margins reflecting tighter fundamentals in recent months.

·         Firm margins contrast with US Group II heavy-grade export prices that maintain steep discount to India/Europe prices in Q2 2025 and start of Q3 2025.

·         Wide price-discount sustains feasibility of arbitrage shipments.

·         Steady base oils margins, combined with wide price-discount to other markets, could point to concern about build-up of surplus supply and preference to clear such volumes quickly.

·         Latin America’s base oils supply could stay at healthy levels amid signs of steady-to-high shipments from US to the region in Q2 2025.

·         Brazil’s base oils supply stays unusually high in May 2025 for second month, reflecting that pick-up in shipments from US.

·         Brazil’s base oils imports from US rise to six-month high in May 2025, even amid slump in US base oils output at start of Q2 2025.

·         Wave of shipments from US, even during round of plant-maintenance work, points to Latin American markets like Brazil as priority outlets for US suppliers.

·         Brazil’s infrequent shipment of large export cargo in May 2025 points to sufficient supply.

·         Dynamic raises risk of mismatch between supply and demand if US exports to Brazil remain at more elevated levels.

·         Argentina’s Group I base oils output stays higher than usual in May 2025 even as exports pause.

·         Output could hold at more elevated levels to tap blenders’ concern about strength of domestic lube demand, boosting their incentive to procure smaller volumes more frequently from local sources.

·         Output could hold at more elevated levels to take advantage of tight Group I fundamentals in overseas markets.

·         Any change in either of those factors could prompt adjustment in output to avoid build-up of surplus volumes.

·         Europe’s Group I base oils supply likely to extend recovery in coming weeks as plant-maintenance draws to close and demand slows.

·         Demand could face further pressure after slump in supply in early-Q2 2025 incentivizes blenders to switch to other base oils grades instead.

·         Some of those blenders could continue to use those other grades even after recovery in Group I supply.

·         Size of recent drop in Group I supply highlights Europe’s dwindling number of Group I plants and larger impact of any drop in output from remaining plants.

·         Europe’s Group I base oils supply falls to seventeen-month low in April 2025.

·         Timing of fall in supply, at time of year when demand faces seasonal rise, compounds impact of tighter availability.

·         Group I supply, less exports to markets outside Europe, falls even more sharply in April 2025, compounding tight regional availability.

·         Drop in supply highlights Italy’s reliance on sole Group I unit in that country and regionwide impact of any change in production at the unit.

·         Drop in supply, combined with uncompetitive Group I prices for export markets, provide additional incentive for overseas buyers to turn to other sources to cover their requirements.

·         Europe’s Group II base oils supply likely to hold steady, extending that trend since late last year.

·         Steady supply contrasts with dip in Group I base oils supply, especially at start of Q2 2025.

·         Steady supply leaves Group II base oils accounting for around 50% of total Group I/Group II supply in April 2025, up from less than 25% share in April 2024.

·         Steady supply boosts Group II share of Europe’s Group I/Group II supply in Jan-April 2025.

·         Any extension of steady Group II supply, combined with recovery in Group I base oils supply, could trigger pick-up in surplus volumes.

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

·         Supplies with full set of OEM approvals could stay tighter amid pause in flows from Spain through most of June 2025.

·         Shipment of cargo to northwest Europe in early-July 2025 is first in a month.

·         Repeat of such shipments would point to resumption of more regular flows from Spain. 

·         Supplies without full set of approvals could get boost amid signs of pick-up in shipments from Middle East to Europe.

·         Dip in Group III supply at start of Q2 2025 coincides with drop in Group II and especially Group I base oils supply.

·         Simultaneous and steeper drop in Group I and Group III base oils supply adds to incentive for blenders to use more Group II base oils instead.