· Diesel price premium to crude oil recovers steadily from April; rebound gathers pace over past month.· Diesel premium to crude stays well below Q2-Q3 2022 levels, well above typical historical levels.· Diesel values get support from tight distillates inventories in key markets and prospect of firmer-than-expected economic growth.· Prospect of firmer diesel demand and tight supply incentivize refiners to focus on producing more distillates rather than base oils.· Any such moves would partially counter pause in base oils plant maintenance work in US.· Firm diesel values incentivize European refiners to extend base oils plant shutdowns..· US’ June base oils exports fall to four-month low from record-high volumes during previous three months.· Exports fall despite base oils prices keeping open the arbitrage to clear surplus supplies to overseas markets.· Open arbitrage contrasts with closed arbitrage during same time a year earlier.· Fall in June base oils exports coincides with planned plant maintenance work in US.· Surge in US exports in June from key ports in US Gulf coast points to ongoing shipment of arbitrage cargoes..· Steady wave of US arbitrage shipments extends into July.· Sustained flow of US arbitrage shipments likely to counter size of any supply-build in Q3 2023.· US’ Q2 base oils exports to Europe fall yoy for fourth quarter amid sustained slowdown in shipments to the region..· Fall in exports to Europe contrasts with rise in total US exports in 1H 2023.· Trend points to moves to redirect surplus supplies to other markets rather than to Europe.· Trend raises prospect of limiting build-up of surplus premium-grade supplies in Europe.· Latin America’s base oils supply stays balanced-to-tight through Q2 2023, likely maintains trend in Q3 2023 ahead of upcoming plant maintenance work..· Global Group III prices face more downward pressure, despite tighter supply in Indonesia and Spain in Q2 2023, highlighting size of current supply-demand imbalance.· Group III supply-demand imbalance accumulated over more than a year as high prices incentivized more production.· Reversion to Group III supply-demand balance will also take time; may speed up if prices incentivize lower production..· Turkey’s demand for Group I base oils imports gets support in 1H 2023 from tighter domestic availability and high prices for supplies from country’s domestic producer..· Turkey’s Group I base oils exports rise in June to highest since end-2021..· Revival in shipments from Turkey to Europe highlight change in trade flows as Europe eyes alternative sources in place of Russian supplies.· Irregularity of the shipments limits European buyers’ ability to incorporate supplies in longer-term procurement plans.· Turkey’s June exports of premium-grade base oils follow similar shipments in March.· Repeat of those flows raises prospect of additional premium grades moving to Europe/US.· Source of Turkey’s export volumes unclear in view of country’s lack of premium-grade production capacity..Global base oils - week of Aug 14: Price outlook - margins
· Diesel price premium to crude oil recovers steadily from April; rebound gathers pace over past month.· Diesel premium to crude stays well below Q2-Q3 2022 levels, well above typical historical levels.· Diesel values get support from tight distillates inventories in key markets and prospect of firmer-than-expected economic growth.· Prospect of firmer diesel demand and tight supply incentivize refiners to focus on producing more distillates rather than base oils.· Any such moves would partially counter pause in base oils plant maintenance work in US.· Firm diesel values incentivize European refiners to extend base oils plant shutdowns..· US’ June base oils exports fall to four-month low from record-high volumes during previous three months.· Exports fall despite base oils prices keeping open the arbitrage to clear surplus supplies to overseas markets.· Open arbitrage contrasts with closed arbitrage during same time a year earlier.· Fall in June base oils exports coincides with planned plant maintenance work in US.· Surge in US exports in June from key ports in US Gulf coast points to ongoing shipment of arbitrage cargoes..· Steady wave of US arbitrage shipments extends into July.· Sustained flow of US arbitrage shipments likely to counter size of any supply-build in Q3 2023.· US’ Q2 base oils exports to Europe fall yoy for fourth quarter amid sustained slowdown in shipments to the region..· Fall in exports to Europe contrasts with rise in total US exports in 1H 2023.· Trend points to moves to redirect surplus supplies to other markets rather than to Europe.· Trend raises prospect of limiting build-up of surplus premium-grade supplies in Europe.· Latin America’s base oils supply stays balanced-to-tight through Q2 2023, likely maintains trend in Q3 2023 ahead of upcoming plant maintenance work..· Global Group III prices face more downward pressure, despite tighter supply in Indonesia and Spain in Q2 2023, highlighting size of current supply-demand imbalance.· Group III supply-demand imbalance accumulated over more than a year as high prices incentivized more production.· Reversion to Group III supply-demand balance will also take time; may speed up if prices incentivize lower production..· Turkey’s demand for Group I base oils imports gets support in 1H 2023 from tighter domestic availability and high prices for supplies from country’s domestic producer..· Turkey’s Group I base oils exports rise in June to highest since end-2021..· Revival in shipments from Turkey to Europe highlight change in trade flows as Europe eyes alternative sources in place of Russian supplies.· Irregularity of the shipments limits European buyers’ ability to incorporate supplies in longer-term procurement plans.· Turkey’s June exports of premium-grade base oils follow similar shipments in March.· Repeat of those flows raises prospect of additional premium grades moving to Europe/US.· Source of Turkey’s export volumes unclear in view of country’s lack of premium-grade production capacity..Global base oils - week of Aug 14: Price outlook - margins