Global base oils market snapshot – Week of 7 September

Author Iain Pocock, Editor

Global base oil prices have extended their rise on the back of a sustained supply tightness in all the key export markets. This trend is showing little sign of changing for now.

US base oil export prices have moved to an unusual and rare premium to US domestic prices. The trend reflected unusually strong overseas demand for US supplies and limited alternative options from other sources. Availability of surplus export supplies from the US has also now halted. Production at several plants remained off line because of power outages following a major storm late last month. With supplies tighter, producers were now focusing on covering requirements in the domestic market.

US Group II domestic prices fall to rare discount to export prices

US Group II domestic prices fall to rare discount to export prices

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Buyers in India and the Mideast Gulf have had to turn to Asia-Pacific producers to cover more of their requirements. Spot availability in Asia-Pacific remained tight. But competition for supplies from Chinese buyers has waned. The trend has boosted the attraction of moving more supplies to other markets. Prices for cfr India N150 have moved to their widest premium to fob Asia N150 prices in more than a decade. Prices for fob Asia N150 have in turn moved to a widening premium to cfr northeast Asia prices.

Fob Asia, cfr India N150 flips to rising premium to cfr northeast Asia prices

Fob Asia, cfr India N150 flips to rising premium to cfr northeast Asia prices

Europe’s tighter supplies of Group I base oils have also supported higher prices. But Group II supplies have been more readily available, curbing their upwards price pressure. The discount of Group I prices to Group II prices has fallen in response. The discount has narrowed to less than $170/t from more than $230/t in early August. The narrower discount boosted the attraction of using Group II base oils instead of Group I.

Group II premium to Group I narrows

Group II premium to Group I narrows

Group III prices in Europe have also risen strongly during the third quarter in response to tighter supplies and strong demand. The pick-up in demand since June reflected a stronger recovery in engine oil consumption. Car use rebounded more strongly than public transport use, and as more people travelled to holiday destinations by car rather than by air. Germany’s engine oil demand contracted by 9pc in June. The contraction was smaller than the 41pc slide in the country’s process oil consumption.

Engine oil recovers faster than industrial oils

Engine oil recovers faster than industrial oils

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