· US base oils prices maintain steep premium to feedstock/heating oil prices, sustaining incentive for refiners to maximise output.· Weaker diesel premium to crude adds to that incentive.· US base oils supply likely to stay tight until market is confident that it is unlikely to face major weather-related disruptions during the peak Atlantic hurricane season.· US National Hurricane Center forecasts no tropical cyclones over the coming week.· Forecasters anticipate strong increase in storm activity from end-Aug 2024 and through Sept 2024.· Any moves to start clearing surplus supplies in coming weeks are likely to counter impact of recent plant issues and upcoming plant-maintenance.· Arbitrage stays shut to key overseas outlets that typically absorb large volumes of surplus supplies.· Closed arbitrage could speed up switch in US from supply-tightness to surplus..· US Group III base oils supply could get a boost in Q3 2024 after South Korea’s exports to US rise to seven-month high in July 2024..· Rise in shipments follows 29% dip in South Korea’s shipments to US in H1 2024.· That dip in shipments cuts share of US base oils imports from South Korea to 24% of total in H1 2024, down from close to 30% share in 2023.· Dip in shipments contrasts with rise in supplies from Middle East to US and rise in share of US imports from that region..· Dynamic leaves South Korean refiners with choice of targeting other markets or protecting market share in US.· Any move to protect market share in US could leave that market facing prospect of additional supplies from Asia and from Middle East..· US supply gets boost from sustained and unusual surge in Europe’s base oils exports to the country in H1 2024..· Europe’s base oils exports to US surge despite tighter regional supply and steep premium of Europe Group II prices to US prices.· Most of the US-bound shipments originate from France and the Netherlands.· US base oils imports from France in the first five months of 2024 mostly arrived in the port of New York..· Latin America’s base oils supply-balance likely to stay tight amid firm demand in region’s largest markets and limited surplus availability in US.· Regional supply likely to start to improve once concerns ease in US about weather-related disruptions, prompting move to cut stocks.· Brazil’s base oils imports show signs of rebounding in July 2024 from previous month on pick-up in shipments from US especially, as well as from Qatar..· Rise in shipments helps to ease country’s tight supply-demand fundamentals at start of Q3 2024.· Brazil's imports rise even ahead of expected arrival of several shipments from South Korea in Aug 2024 and Sept 2024..· Europe’s Group I base oils supply likely to get support from firm margins and prices that continue to incentivize regional refiners to maximise output and keep supplies within Europe.· Firm prices sustain attraction for overseas refiners to move more Group I shipments to Europe. · Europe’s base oils imports from countries producing Group II base oils fall back to more typical levels in June 2024..· Lower imports were likely balanced out by firm regional Group II base oils output, keeping premium-grade base oils supply at more typical levels heading into Q3 2024.· Europe’s Group II prices extend rise vs VGO and vs FOB NE Asia prices through Aug 2024.· Those price dynamics instead point to tighter Group II supply and firm demand in Q3 2024.· Any disconnect between price dynamics and supply-demand fundamentals could trigger an adjustment in response.· Europe’s Group III base oils supply could tighten in coming months because of scheduled plant maintenance in Indonesia and then Spain.· Europe is key outlet for Group III supplies from both countries..· Europe’s Group III base oils supply holds steady in June 2024 from previous month, extends fall from year-earlier levels..· Europe’s Group III base oils supply falls 14% in H1 2024 from year-earlier levels.· Europe’s Group II base oils supply falls 26% in Jan-May 2024 from year-earlier levels.· Europe’s Group I base oils supply falls 2% in Jan-May 2024 from year-earlier levels..· Europe’s Group I base oils prices outperform Group II and Group III prices even as supply falls less.· Dynamic points to still-firm demand for Group I base oils relative to other grades.· Dynamic contrasts with other regions, where buyers are increasingly switching to premium-grade base oils..· Europe’s base oils exports to Africa rise in H1 2024 from year-earlier even as total exports to non-EU markets fall.· Rise in exports contrasts with fall in shipments from US to Africa, despite tighter supply in Europe..· Dynamic points to greater reliability of supplies from Europe, incentivizing buyers to continue to prioritize that market to cover requirements.· Volatility of supplies from US similarly deters buyers from increasing their reliance on shipments from that source.· Trend provides opportunity for refiners in other regions to offer more reliable source of supplies..Americas/EMEA base oils demand outlook: Week of 26 Aug.Asia base oils supply outlook: Week of 26 Aug.Global base oils margins outlook: Week of 26 Aug.Global base oils arb outlook: Week of 26 Aug.S Korea’s July exports to Americas rise.Europe June Grp III supply holds steady
· US base oils prices maintain steep premium to feedstock/heating oil prices, sustaining incentive for refiners to maximise output.· Weaker diesel premium to crude adds to that incentive.· US base oils supply likely to stay tight until market is confident that it is unlikely to face major weather-related disruptions during the peak Atlantic hurricane season.· US National Hurricane Center forecasts no tropical cyclones over the coming week.· Forecasters anticipate strong increase in storm activity from end-Aug 2024 and through Sept 2024.· Any moves to start clearing surplus supplies in coming weeks are likely to counter impact of recent plant issues and upcoming plant-maintenance.· Arbitrage stays shut to key overseas outlets that typically absorb large volumes of surplus supplies.· Closed arbitrage could speed up switch in US from supply-tightness to surplus..· US Group III base oils supply could get a boost in Q3 2024 after South Korea’s exports to US rise to seven-month high in July 2024..· Rise in shipments follows 29% dip in South Korea’s shipments to US in H1 2024.· That dip in shipments cuts share of US base oils imports from South Korea to 24% of total in H1 2024, down from close to 30% share in 2023.· Dip in shipments contrasts with rise in supplies from Middle East to US and rise in share of US imports from that region..· Dynamic leaves South Korean refiners with choice of targeting other markets or protecting market share in US.· Any move to protect market share in US could leave that market facing prospect of additional supplies from Asia and from Middle East..· US supply gets boost from sustained and unusual surge in Europe’s base oils exports to the country in H1 2024..· Europe’s base oils exports to US surge despite tighter regional supply and steep premium of Europe Group II prices to US prices.· Most of the US-bound shipments originate from France and the Netherlands.· US base oils imports from France in the first five months of 2024 mostly arrived in the port of New York..· Latin America’s base oils supply-balance likely to stay tight amid firm demand in region’s largest markets and limited surplus availability in US.· Regional supply likely to start to improve once concerns ease in US about weather-related disruptions, prompting move to cut stocks.· Brazil’s base oils imports show signs of rebounding in July 2024 from previous month on pick-up in shipments from US especially, as well as from Qatar..· Rise in shipments helps to ease country’s tight supply-demand fundamentals at start of Q3 2024.· Brazil's imports rise even ahead of expected arrival of several shipments from South Korea in Aug 2024 and Sept 2024..· Europe’s Group I base oils supply likely to get support from firm margins and prices that continue to incentivize regional refiners to maximise output and keep supplies within Europe.· Firm prices sustain attraction for overseas refiners to move more Group I shipments to Europe. · Europe’s base oils imports from countries producing Group II base oils fall back to more typical levels in June 2024..· Lower imports were likely balanced out by firm regional Group II base oils output, keeping premium-grade base oils supply at more typical levels heading into Q3 2024.· Europe’s Group II prices extend rise vs VGO and vs FOB NE Asia prices through Aug 2024.· Those price dynamics instead point to tighter Group II supply and firm demand in Q3 2024.· Any disconnect between price dynamics and supply-demand fundamentals could trigger an adjustment in response.· Europe’s Group III base oils supply could tighten in coming months because of scheduled plant maintenance in Indonesia and then Spain.· Europe is key outlet for Group III supplies from both countries..· Europe’s Group III base oils supply holds steady in June 2024 from previous month, extends fall from year-earlier levels..· Europe’s Group III base oils supply falls 14% in H1 2024 from year-earlier levels.· Europe’s Group II base oils supply falls 26% in Jan-May 2024 from year-earlier levels.· Europe’s Group I base oils supply falls 2% in Jan-May 2024 from year-earlier levels..· Europe’s Group I base oils prices outperform Group II and Group III prices even as supply falls less.· Dynamic points to still-firm demand for Group I base oils relative to other grades.· Dynamic contrasts with other regions, where buyers are increasingly switching to premium-grade base oils..· Europe’s base oils exports to Africa rise in H1 2024 from year-earlier even as total exports to non-EU markets fall.· Rise in exports contrasts with fall in shipments from US to Africa, despite tighter supply in Europe..· Dynamic points to greater reliability of supplies from Europe, incentivizing buyers to continue to prioritize that market to cover requirements.· Volatility of supplies from US similarly deters buyers from increasing their reliance on shipments from that source.· Trend provides opportunity for refiners in other regions to offer more reliable source of supplies..Americas/EMEA base oils demand outlook: Week of 26 Aug.Asia base oils supply outlook: Week of 26 Aug.Global base oils margins outlook: Week of 26 Aug.Global base oils arb outlook: Week of 26 Aug.S Korea’s July exports to Americas rise.Europe June Grp III supply holds steady
