Global base oils market snapshot – Week of 19 October

Автор Iain Pocock, Editor

Global base oil prices have extended their rise in response to firm supply-demand fundamentals. Prices are unusually high, supply is tight and demand is strong at a time of year when prices and market fundamentals typically weaken. That scenario is playing out differently this year.

The recent strength in US base oil export prices highlights the ongoing supply tightness in that market. US Group I and Group II export prices have remained at a significant premium to domestic prices.

This is unusual.

Group II export prices are typically around $50-60/t lower than US domestic base oil prices.

The price strength reflects the prolonged shutdown of a key US Gulf coast Group II base oil unit since end-August. It has coincided with plant maintenance work this month in the Mideast Gulf. The shutdowns have cut the number of supply sources for key import markets like India, the Mideast Gulf and Latin America.

US Group II export prices maintain premium to domestic prices

 US base oil, lube exports to Europe fall from 2Q 2020
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A sharp drop in arbitrage shipments from the US and lower supply from the Mideast Gulf have coincided with a sustained rise in demand in India for Group I and Group II base oils. The tightness has triggered a surge in prices.

The price rise contrasted with steadier prices in northeast Asia for Group II light grades. The steadier prices reflected China’s structural surplus of these supplies. The premium of cfr India N150 to cfr northeast Asia prices has risen in response to its highest level in more than a decade.

The rise in cfr India prices for Group I bright stock has also outpaced prices in northeast Asia. But bright stock prices in northeast Asia have also risen as buyers in that market compete for these supplies. The trend reflected China’s ongoing structural shortage of these Group I heavy grades. The premium of cfr India bright stock to cfr northeast Asia has risen to its widest level in almost a decade. But the premium was much smaller than the Group II N150 premium.

Cfr India N150 premium surges, bright stock premium rises

Cfr India N150 premium surges, bright stock premium rises 

Tighter overseas supply of Group II base oils has curbed exports of the product to Europe. Tight supply and rising prices of Group I and Group III base oils in Europe have boosted the attraction of consuming more Group II base oils instead. Prices for Group II base oils have begun to rise in recent weeks in response to the firmer supply-demand fundamentals.

US base oil, lube exports to Europe fall from 2Q 2020

US base oil, lube exports to Europe fall from 2Q 2020

 

The unusual Americas and Europe market dynamics in the wake of peak Covid-19

 
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