· Squeezed US base oils prices versus feedstock and competing fuel prices incentivize run-cuts, especially to cut surplus export volumes.· Lack of scheduled plant maintenance work leave production capacity higher than usual in early 2024.· Ongoing availability of export cargoes points to persistent surplus.· Ongoing shipment of arbitrage cargoes points to steady removal of that surplus.· Competitive US export prices curb opportunities for supplies from other markets to target Latin America..· US Group III supplies from South Korea surge at end-2023, early this year.· Supplies from South Korea show signs of falling over coming weeks after drop in country’s exports to US in Jan 2024 and signs of further slowdown in shipments to US in Feb 2024..· Europe’s base oils supply surplus likely fell in Q4 2023 from Q4 2022 after supply lagged demand in Oct 2023 and Nov 2023 combined..· Surplus supply at start of 2024 still put pressure on prices in face of seasonal dip in demand.· Lower prices and margins incentivize refiners to cut or maintain lower output.· Lower surplus supply from end-2023 and incentive to maintain lower output in early 2024 could have larger impact as and when demand revives following winter-slowdown..· Europe’s Group I base oils refiners face growing incentive to lower further their run-rates as domestic margins extend fall.· Italy’s base oils supply could have a larger impact on market prices over the coming months because of uncertainty about output from and the timing of the closure of one of its base oils units.· The uncertainty incentivizes blenders to avoid committing to term contracts.· Any drop in term contracts increases the impact of supply from the base oils unit, even if the volume is lower than usual, because of the need to find outlets for the supply.· Italy’s base oils output and stocks stay relatively low in Dec 2023..· The rise in output and stocks still has a large impact on market prices in early 2024 because of availability of spot volumes..· Europe’s Group II base oils supply set to be more reliant on shipments from US over coming weeks as plant maintenance work cuts regional output.· Arbitrage to move US Group II supplies to Europe stays wide open, boosting feasibility of rise in flows from US.· Europe’s Group III base oils supply likely to get boost early this year from steady flows from Spain, pick-up in shipments from Asia.· South Korea’s January base oils exports to Europe rise to three-month high, adding to pick-up in flows from Indonesia to Europe..· Europe’s December Group III base oils supply already rises even as demand faces seasonal slowdown..· Supply rises in Dec 2023 even with ongoing slowdown in shipments from UAE.· Higher supply even with slowdown in shipments from UAE highlights plentiful Group III availability.· Trend highlights need for Group III base oils to boost their share of Europe’s total base oils demand.· The sustained fall in prices helps to achieve that goal..· Europe takes delivery of more Group III base oils from Mideast Gulf in Dec 2023 and throughout all of 2023.· Rising supply contrasts with fall in US imports of Group III base oils from Mideast Gulf in Dec 2023 and in 2023..· Europe takes delivery of more supplies even with Europe Group III prices sliding to a steep discount to US prices in 2023.· Rise in supplies compounds surplus of Group III base oils in Europe in 2023.· Trend points to weak demand and rising domestic Group III supply in US market.· Trend points to structural oversupply of Group III base oils unless and until demand revives..· Europe and North Africa could be attractive outlets for more supplies from Saudi Arabia, amid signs of slowdown in shipments from the Mideast Gulf country so far in Feb 2024..· Mideast Gulf’s supply of Group I base oils from Asia and Europe likely to remain tighter amid limited availability in Asia, logistical complications for supplies from Europe..Americas/EMEA base oils demand outlook: Week of Feb 26.Asia base oils supply outlook: Week of Feb 26.Global base oils margins outlook: Week of Feb 26.Global base oils arb outlook: Week of Feb 26.Global base oils cargo flows: Week of Feb 26
· Squeezed US base oils prices versus feedstock and competing fuel prices incentivize run-cuts, especially to cut surplus export volumes.· Lack of scheduled plant maintenance work leave production capacity higher than usual in early 2024.· Ongoing availability of export cargoes points to persistent surplus.· Ongoing shipment of arbitrage cargoes points to steady removal of that surplus.· Competitive US export prices curb opportunities for supplies from other markets to target Latin America..· US Group III supplies from South Korea surge at end-2023, early this year.· Supplies from South Korea show signs of falling over coming weeks after drop in country’s exports to US in Jan 2024 and signs of further slowdown in shipments to US in Feb 2024..· Europe’s base oils supply surplus likely fell in Q4 2023 from Q4 2022 after supply lagged demand in Oct 2023 and Nov 2023 combined..· Surplus supply at start of 2024 still put pressure on prices in face of seasonal dip in demand.· Lower prices and margins incentivize refiners to cut or maintain lower output.· Lower surplus supply from end-2023 and incentive to maintain lower output in early 2024 could have larger impact as and when demand revives following winter-slowdown..· Europe’s Group I base oils refiners face growing incentive to lower further their run-rates as domestic margins extend fall.· Italy’s base oils supply could have a larger impact on market prices over the coming months because of uncertainty about output from and the timing of the closure of one of its base oils units.· The uncertainty incentivizes blenders to avoid committing to term contracts.· Any drop in term contracts increases the impact of supply from the base oils unit, even if the volume is lower than usual, because of the need to find outlets for the supply.· Italy’s base oils output and stocks stay relatively low in Dec 2023..· The rise in output and stocks still has a large impact on market prices in early 2024 because of availability of spot volumes..· Europe’s Group II base oils supply set to be more reliant on shipments from US over coming weeks as plant maintenance work cuts regional output.· Arbitrage to move US Group II supplies to Europe stays wide open, boosting feasibility of rise in flows from US.· Europe’s Group III base oils supply likely to get boost early this year from steady flows from Spain, pick-up in shipments from Asia.· South Korea’s January base oils exports to Europe rise to three-month high, adding to pick-up in flows from Indonesia to Europe..· Europe’s December Group III base oils supply already rises even as demand faces seasonal slowdown..· Supply rises in Dec 2023 even with ongoing slowdown in shipments from UAE.· Higher supply even with slowdown in shipments from UAE highlights plentiful Group III availability.· Trend highlights need for Group III base oils to boost their share of Europe’s total base oils demand.· The sustained fall in prices helps to achieve that goal..· Europe takes delivery of more Group III base oils from Mideast Gulf in Dec 2023 and throughout all of 2023.· Rising supply contrasts with fall in US imports of Group III base oils from Mideast Gulf in Dec 2023 and in 2023..· Europe takes delivery of more supplies even with Europe Group III prices sliding to a steep discount to US prices in 2023.· Rise in supplies compounds surplus of Group III base oils in Europe in 2023.· Trend points to weak demand and rising domestic Group III supply in US market.· Trend points to structural oversupply of Group III base oils unless and until demand revives..· Europe and North Africa could be attractive outlets for more supplies from Saudi Arabia, amid signs of slowdown in shipments from the Mideast Gulf country so far in Feb 2024..· Mideast Gulf’s supply of Group I base oils from Asia and Europe likely to remain tighter amid limited availability in Asia, logistical complications for supplies from Europe..Americas/EMEA base oils demand outlook: Week of Feb 26.Asia base oils supply outlook: Week of Feb 26.Global base oils margins outlook: Week of Feb 26.Global base oils arb outlook: Week of Feb 26.Global base oils cargo flows: Week of Feb 26