Global base oils market snapshot – Week of 17 August

Author Iain Pocock, Editor

Strong overseas demand and tightening Group I base oil supplies especially have triggered a rise in export prices in all the key markets.

The tighter supplies have also prompted more overseas buyers to use more Group II base oils instead. Firm demand in India and southeast Asia has helped to cover for more muted Chinese buying interest for Group II base oils. The firm fundamentals have helped to support a steady rise in prices.

European export prices have risen steadily since early June. They have risen at a faster pace than other markets and at a faster pace than prices in Europe’s own market, in response to strong demand and unusually tight supplies.

The discount of fob Europe export SN 500 to domestic Europe SN 500 prices has narrowed to just $60/t in response. The discount has narrowed from $170/t in May to the narrowest level in more than two years.

Europe export prices lead rebound

Europe export prices lead rebound

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Asia-Pacific producers have begun to move more supplies to India where Group II prices have rebounded during the third quarter. The stronger prices contrasted with steady Group II prices in China.

The diverging fundamentals have triggered a rebound in cfr India N150 prices to a premium of more than $100/t to cfr northeast Asia prices. Northeast Asia prices had been at a premium of $50/t to cfr India prices as recently as May.

Demand rises in India, slows in China

Demand rises in India, slows in China

US Group II export prices have firmed to increasingly narrow discounts to US domestic prices. The price strength reflects strong demand for Group I and Group II supplies in Latin America, Africa, the Mideast Gulf and India. Demand got a further boost from the lack of export supplies from Europe.

The discount of US Group II N100 export prices to domestic prices has narrowed to $0.07/USG. This was the narrowest since the beginning of 2019.

US domestic-export prices converge

US domestic-export prices converge

Heavy-grade prices have risen more strongly than light grades in all the key regions. The price strength reflects strong demand for these supplies in Latin America where base oil production rates are lower.

It reflects strong demand in the Mideast Gulf, where supplies from Iran have fallen.

It reflects weaker demand for light grades in China whose new plants have added to the country’s oversupply of the product.

The premium of fob Asia SN 500 over SN 150 has risen to more than $100/t. This was up from close to parity in early June and its widest since early 2018.

Heavy-grade premiums widen

Heavy-grade premiums widen

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