· US base oils premium to VGO steadies after sustained slide since mid-Sept 2024.· Premium remains at level that curbs pressure on refiners to adjust output in response to weak margins.· But sliding premium since Sept 2024 could incentivize refiners to adjust output to limit continuation of trend.· US supply shows signs of staying at manageable levels so far in Q4 2024 amid combination of plant maintenance and steady exports to outlets like India in recent months.· US supply surplus faces prospect of rising more quickly once plant maintenance ends and as demand ebbs in domestic/overseas markets.· Prospect of dip in overseas demand leaves sellers with choice of cutting prices even more or of adjusting production to limit size of supply-build.· Price adjustments could facilitate additional arbitrage shipments and incentivize refiners to cut output..· Latin America’s base oils supply less likely to need additional volumes from US over coming months than at same time last year.· Argentina’s base oils supply lags demand in Sept 2024 for second time in three months amid ongoing slide in imports..· Argentina’s domestic base oils output rises this year, covers more of country’s shrinking demand, compounding downward pressure on imports..· Argentina likely to need to tap overseas suppliers to cover most of any subsequently recovery in lube demand.· Any such recovery is unlikely at least for next few months.· Argentina imports additional supplies from Middle East in Sept 2024, compounding drop in demand for US base oils..· Imports from Middle East likely consist mostly of Group I base oils, adding to Argentina’s domestic Group I base oils output.· Moves to secure Group I supplies from Middle East rather than US could reflect shipment of more US supplies to Europe, where prices are likely to be higher.· Moves to secure additional Group I supplies contrasts with global trend of growing consumption of premium-grade base oils..· Europe’s Group I base oils supply surplus could be more manageable over coming months as plant maintenance work, and recent unexpected production issues and shipments to markets like southeast Asia trim supply.· Large portion of Europe’s surplus Group I supply at year-end often originated from Italy in recent years.· Drop in Italy’s Group I production capacity this year could curb size of any such surplus.· Surplus could still rise fast in view of likely seasonal slump in regional lube consumption in month of December.· Scenario would mirror trend that already materialized in Q2-Q3 2024, when Europe Group I supply held firmer..· Firmer supply contrasts with ongoing slide in regional lube consumption, triggering growing supply-demand mismatch in Q3 2024..· Trend boosts incentive for refiners to adjust output or boost exports to markets outside Europe in coming weeks to avoid repeat of that scenario..· Europe’s Group II base oils supply likely to remain readily available amid firm regional output.· Wider Europe Group II premium to US prices sustains attraction of moving more US shipments to the region..· Falling US demand adds to attraction for US suppliers to move more shipments to markets like Europe..· Europe’s Group III base oils supply shows signs of staying readily available.· Lower regional Group III prices relative to other markets would complicate arbitrage, deterring shipments from overseas markets.· Any dip in Europe’s Group III base oils supplies from overseas markets would help to limit prospect of regional supply-build over coming months.· Europe’s Group III prices remain firm relative to prices in other markets even after sharp fall in outright prices in recent weeks..· Ongoing Group III price-premium relative to other regions sustains incentive for overseas refiners to move more shipments to Europe.· Spain’s exports of premium-grade base oils stays lower than usual in Oct 2024.· Drop in shipments likely curbs Europe’s supply of Group III base oils with full set of OEM approvals..Americas/EMEA base oils demand outlook: Week of 4 Nov.Asia base oils supply outlook: Week of 4 Nov.Global base oils margins outlook: Week of 4 Nov.Global base oils arb outlook: Week of 4 Nov.Argentina’s Sept base oils supply lags demand
· US base oils premium to VGO steadies after sustained slide since mid-Sept 2024.· Premium remains at level that curbs pressure on refiners to adjust output in response to weak margins.· But sliding premium since Sept 2024 could incentivize refiners to adjust output to limit continuation of trend.· US supply shows signs of staying at manageable levels so far in Q4 2024 amid combination of plant maintenance and steady exports to outlets like India in recent months.· US supply surplus faces prospect of rising more quickly once plant maintenance ends and as demand ebbs in domestic/overseas markets.· Prospect of dip in overseas demand leaves sellers with choice of cutting prices even more or of adjusting production to limit size of supply-build.· Price adjustments could facilitate additional arbitrage shipments and incentivize refiners to cut output..· Latin America’s base oils supply less likely to need additional volumes from US over coming months than at same time last year.· Argentina’s base oils supply lags demand in Sept 2024 for second time in three months amid ongoing slide in imports..· Argentina’s domestic base oils output rises this year, covers more of country’s shrinking demand, compounding downward pressure on imports..· Argentina likely to need to tap overseas suppliers to cover most of any subsequently recovery in lube demand.· Any such recovery is unlikely at least for next few months.· Argentina imports additional supplies from Middle East in Sept 2024, compounding drop in demand for US base oils..· Imports from Middle East likely consist mostly of Group I base oils, adding to Argentina’s domestic Group I base oils output.· Moves to secure Group I supplies from Middle East rather than US could reflect shipment of more US supplies to Europe, where prices are likely to be higher.· Moves to secure additional Group I supplies contrasts with global trend of growing consumption of premium-grade base oils..· Europe’s Group I base oils supply surplus could be more manageable over coming months as plant maintenance work, and recent unexpected production issues and shipments to markets like southeast Asia trim supply.· Large portion of Europe’s surplus Group I supply at year-end often originated from Italy in recent years.· Drop in Italy’s Group I production capacity this year could curb size of any such surplus.· Surplus could still rise fast in view of likely seasonal slump in regional lube consumption in month of December.· Scenario would mirror trend that already materialized in Q2-Q3 2024, when Europe Group I supply held firmer..· Firmer supply contrasts with ongoing slide in regional lube consumption, triggering growing supply-demand mismatch in Q3 2024..· Trend boosts incentive for refiners to adjust output or boost exports to markets outside Europe in coming weeks to avoid repeat of that scenario..· Europe’s Group II base oils supply likely to remain readily available amid firm regional output.· Wider Europe Group II premium to US prices sustains attraction of moving more US shipments to the region..· Falling US demand adds to attraction for US suppliers to move more shipments to markets like Europe..· Europe’s Group III base oils supply shows signs of staying readily available.· Lower regional Group III prices relative to other markets would complicate arbitrage, deterring shipments from overseas markets.· Any dip in Europe’s Group III base oils supplies from overseas markets would help to limit prospect of regional supply-build over coming months.· Europe’s Group III prices remain firm relative to prices in other markets even after sharp fall in outright prices in recent weeks..· Ongoing Group III price-premium relative to other regions sustains incentive for overseas refiners to move more shipments to Europe.· Spain’s exports of premium-grade base oils stays lower than usual in Oct 2024.· Drop in shipments likely curbs Europe’s supply of Group III base oils with full set of OEM approvals..Americas/EMEA base oils demand outlook: Week of 4 Nov.Asia base oils supply outlook: Week of 4 Nov.Global base oils margins outlook: Week of 4 Nov.Global base oils arb outlook: Week of 4 Nov.Argentina’s Sept base oils supply lags demand
