For the Quarter Ending September 2023
North America
Comparatively, the Base oil market in the USA performed better in the third quarter than the previous one. During July, the Base oil prices established a bearish market sentiment amongst consumers amidst lackluster demand and adequate-to-ample supplies. Moreover, after the completion of a turnaround at Chevron's API Group II Plant at the end of July, an increase in the export of Base oil cargoes has been observed, further supporting the downtrend. However, the prices have rebounded during August, on the verge of price adjustments by key market players. As per the market players, ExxonMobil's announcement of a price rise due to rising feedstock crude oil prices, effective from August 4th, surprised some distributors. Therefore, under the influence of prevailing market sentiments, other key players, including Motiva, Chevron, Petro-Canada, Avista Oil, and Safety-Kleen, have also decided to increase the posted prices of Base oil to support the market values, which eventually tightened the supplies during August. Additionally, several production units, including Calumet Group I and HollyFrontier plant turnaround, tightened the supplies of API Group I and Group II grades during this September, which supported the uptrend.
Asia
The Base oil market in China remained sluggish in the third quarter compared to the second quarter. A declining trend has been observed in Base oil prices during July, followed by the previous month's downturn, and the religious holiday celebrated in China hampered the buying interest of downstream lubricants during July. Moreover, the cheaper imports from Russian crude oil put downward pressure on base oil manufacturing prices. Moreover, most of the refineries were operating at top rates during August, backed by the sole Group II producer in Taiwan, who was padding inventories to cover term requirements during an upcoming turnaround. Furthermore, the traders failed to attract consumers due to the seasonal slowdown along with the uncertain demand from the downstream lubricant industry. This has affected the market proportion towards the negative buying sentiments, which has resulted in showcasing the downtrend in the Chinese Base oil market. However, the prices have rebounded significantly during September, supported by a tight supply-demand balance and fluctuating feedstock crude oil prices.
Europe
Marginal improvement has been observed by the European Base oil market during the third quarter of the year compared to the previous one. However, the market sentiments remained negative during July due to the holiday celebration of Eid al-Adha, which has affected the business activities somewhat. Furthermore, the demand for Base oil continues to lag in most regions of Europe, including Germany, Belgium, and the Netherlands, impinging on Base oil sales due to the holiday season during August, which muted the trading activity for Base oil and other downstream lubricant products. Many blending operations have halted their production units, leading to a significant decrease in productivity. The quantity of finished lubricants coming off production lines reached an all-time low during August to settle the prices of Base oil at 1378 USD/tonne Group II H500 FD Hamburg, Germany. On the contrary, the German Base oil market witnessed a decent hike during September amid a shift in production as the refiners have started to divert their manufacturing units to distillates to maintain higher profit margins. As a ripple effect, the availability of Base Oil in the German market was hampered, which surged the price trend.
MEA
During the third quarter, several countries in the Middle East experienced minimal fluctuation, whereas UAE Base oil prices admitted stability during July as the market dynamics have not changed, and enough supplies to the UAE have been catering to the growing demand. However, The Base oil prices admitted a decent decline in Saudi Arabia during August amidst a slowdown in the market activity. The overall fundamentals of the Base oil market remained quiet, with several players on holiday and others waiting for the heat to subside. The cargoes of Base oil have been continuously moving but at a medium pace due to the extreme weather conditions within the Middle East Gulf region. As a ripple effect, the fundamental demand was relatively subdued, while few market players were trying to purchase cargoes of Group I and Group II Base stocks before prices started to move upward. Due to the underlying situation, the demand for the Base oil in UAE has outpaced the continuous supply from Russia, and additional Group II cargoes were prepared to export from South Korea and Singapore to cater to the augmented demand during September, which surged the prices.
For the Quarter Ending June 2023
North America
During the second quarter, the overall base oil market in the US contracted as compared to the first quarter, which was influenced by the higher interest rates. A downtrend of base oil prices in the US has been observed for another quarter due to the persistent rise in interest rates accounted by the FED has negatively affected overall demand. As per the data, the Industrial Production Total Index for the US fell from 103.1 (April) to 103 (May), causing the economic activities to be low. Despite the Memorial Day Holiday on May 29, suppliers had not met expectations due to higher inventories than the previous year. Reservoirs were ample enough to meet the demand. Regardless of simulating buying interest by offering lowered prices, acquisition remained low. Moreover, domestic companies such as Chevron and SK Enmove were reducing the prices of Group III during May. Economic uncertainties and high lubricant prices influenced the prices to decrease and settle at USD 1413 per tonne continuously Base Oil group II N 100 FOB Texas during the end of May.
Asia
During the second quarter, the overall base oil market in Asia remains to grow as compared to the first quarter, which was influenced by the disruption in the supply chain. The constant uptrend of Base Oil, considering improved domestic demands and depressed supply in the market has influenced the prices till the second week of May. As per the market sources, the quantities of cargoes from Northeast and Southeast Asia had decreased in May along with Taiwanese cargoes, affecting China's supply chain. However, increased feedstock crude oil prices and its operating cost tender the prices. Despite having a supply cut of Group I base oil from Indonesia, Thailand, and Singapore, ample stockpiles at domestic producers led the prices to drop during June. Additionally, Dalian Hengli Petrochemical was shut down till mid-June for Group II/ III Base oil in China. Likewise, the steady demand for material has influenced the prices to hover around USD 978 per tonne Base Oil II H-500-FOB China during the end of May.
Europe
During the second quarter, Europe's overall base oil market is comparatively weaker than the the first quarter. The second Quarter of 2023 has experienced an upward trend due to the rolling demand for Group II Base Oil till the second week of May 2023. As the blenders were shifting their production from Group I to Group II, a notable difference in demands was observed for finished lubricants. Some offers Group 1 limited the export from Europe and the depleted stocks of Russian Oils, which affected the overall supply chain of API Group I and Group II Base Oil. Moreover, the sluggish economic activity hampered the effective price trend of commodities. However, the traders showed negligible interest amidst ample product availability, stable the prices of Base Oil till June. Likewise, the steady supply of base oil within Europe and fluctuating crude oil market trend had influenced the prices of Base oil to remain steady during the end of June.
MEA
During the second quarter, several countries in Middle East Asia showed different pricing trends. The second quarter of Saudi Arabia has experienced a minimal decreasing trend, followed by the previous quarter. Base oil from Russia has been imported to Saudi Arabia at an alternative cheaper price after sanction from Europe for their own consumption. Additional discounts on raw materials as well as finished products were received in order to sustain their trade activities and maintain their existence in the market. Ample supplies influenced the prices to settle at 1750 Base Oil Group III 8cSt (FOB) Dammam during May. The second quarter of UAE have experienced a marginal upward trend before dropping extensively in the first quarter amid a stable demand-supply gap for the product. However, a slight increase in trading activities was observed during May as the Russian refineries were eager to sell large quantities of Base oil. Due to the temporary hold on the Turkish market, Base oil prices hardly fluctuated to settle at 1465 USD/ tonne Base oil II Light SN Ex-Dubai during April.
The US Base Oil market has seen a slow demand this quarter, despite the arrival of the seasonal demand expected at this time. Uncertainty in the market and slow sales of lubricants have led to downward pressure on Base Oil prices. Raw material costs, insurance, labor, and logistics have increased, leading to price hikes for some finished products. Some producers offered temporary discounts to encourage buyers to take on more volumes, as demand was slower than in previous years. This situation was perplexing as orders typically increase in the spring. Market sources revealed that the persistent rise in interest rates by the FED had been the major driving factor for the economic slowdown.
On March 31st, it was reported that despite China's recovering demand for Base Oil, several plants were operating at reduced capacities due to decreased demand and overcapacity caused by the pandemic. This is due to strict lockdowns and mobility restrictions enforced with a stringent zero-COVID policy. On mid of the quarter, Base Oil prices fluctuated marginally, except for H 500, which continued its uptrend due to a shortage of heavy base oils. On mid of March, Asia's Base Oil prices saw a marginal increase due to improving domestic demand, although production rates remained low at around 40%. Heavy grades were in high demand, causing temporary shortages in the market, and cargoes were scheduled to China from Taiwan and South Korea to meet demand.
During the month ending January, the price of Base Oil II Light SN FD Hamburg (Germany) remained steady at USD 1395/MT, with stable demand and supply witnessed in the domestic market. However, the EU's embargo on Russian fuel imports from February 5th, 2023, led to a temporary shortage of refined products in Europe, as Russia was the largest provider of fuels in the region. China's end of COVID-19 lockdowns could not boost demand in the international market after the Lunar New Year celebrations. Base oil prices received nominal fluctuations due to usual market supply changes, with supplies remaining stable in Europe despite maintenance turnaround. European Base Oil market was experiencing low demand fundamentals throughout the quarter, leading several refiners to put their refineries on maintenance turnaround. Demand varied grade over grade, with some grades in ample supply while others remained short in the market.
