For the Quarter Ending September 2024
North America
Throughout Q3 2024, the North American Base Oil market exhibited stability, with prices remaining relatively unchanged. Though prices remained stable initially, base oil demand saw an uptick in July, prompting suppliers to tap into their backup reserves. A key driver of stability was the balanced-to-tight supply conditions across most base stock categories as production levels were keeping pace with the current demand which prevented any major price spikes during this timeframe.
Moreover, inventory building in anticipation of hurricane season and unexpected production outages contributed to a tight supply situation for base oils in July. However, after witnessing immense stability, the US base oil market witnessed a marginal decline in prices in September 2024, primarily driven by lower demand from the downstream lubricants market. This price reduction was initiated by Motiva, followed by similar moves from other suppliers like Excel Paralubes, SK Enmove, Chevron, and Calumet declined the trend.
The overall trend in the third quarter remained stable, reflecting a resilient market amidst various challenges. As Q3 ended, the price of Base Oil Group I SN 150 FOB Texas in the USA stood at USD 17013/MT, underscoring the prevailing stability in the market.
APAC
The third quarter of 2024 for Base Oil in the APAC region has been characterized by decreasing prices, influenced by several key factors. Market dynamics were primarily impacted by oversupply conditions, as production rates remained high while demand softened from the downstream lubricant industry due to the off-season. This imbalance led to a surplus of base oils, putting downward pressure on prices. Seasonal patterns also played a role, with reduced buying activity due to the monsoon season affecting demand. Additionally, logistical challenges such as port congestion made imported base oil less appealing, further contributing to the decline in prices. Additionally, local base oils were more affordable than imports, allowing domestic consumers to meet many of their needs. This resulted in a cautious stance from purchasers, which in turn reduced demand for additional base oil cargoes. The overall trend in the Singapore region mirrored the negative sentiment, with prices declining by 1% compared to the previous quarter in 2024. The quarter-ending price for Base Oil I SN 150 Ex Jurong in Singapore stood at USD 873/MT, reflecting the prevailing downward pricing environment in the region.
Europe
The third quarter of 2024 in the European Base Oil market has been characterized by stability in prices. While base oil prices in Europe including the Netherlands remained stable during July 2024, the overall market remained surprisingly high for this time of year due to ongoing supply constraints. High shipping costs resulting from the Hamburg port strike and the Red Sea issues, particularly for exports to Europe face a significant lack of API Group I base oils. The European base oil market in the Netherlands has entered a period of relative calm, with prices holding steady amid a backdrop of seasonal slowdown and improving supply conditions. The traditional summer lull has seen a decline in market activity as industry participants take advantage of the holiday period to recharge. While the conflicts have disrupted supply chains and forced some businesses to adapt their operations, the market has shown resilience in September. The quarter has seen a balanced supply-demand dynamic, with restored supplies and lower feedstock Crude oil costs during September contributing to the overall stability. Ending the quarter at USD 1061/MT for Base Oil I SN 150 FD in Rotterdam, Netherlands, the market has maintained a consistent stable sentiment throughout the period.
MEA
The Base Oil market in the MEA region for Q3 2024 has been characterized by stability, with prices admitted to an uptrend during July. Supply constraints due to ongoing shipping issues and disruptions in traditional shipping routes have played a significant role in maintaining a hike during July 2024. High feedstock Crude oil costs, logistical challenges, and strong demand for finished lubricants have also contributed to the bullish pricing environment in the region. Fewer vessels were willing to operate in the Red Sea due to safety risks. This shortage drives up shipping costs for those who venture into the region. However, a deceleration in summer slowdown during August offset the uptrend trend and maintained stability during this period. In Saudi Arabia specifically, the 18% increase from the same quarter last year indicates a positive trend in pricing, while the 5% increase from the previous quarter underscores the continued stability in the market. The quarter-ending price of USD 1735/MT for Base Oil Group-III 4cSt FOB Dammam in Saudi Arabia reflects the overall stable sentiment in the market during Q3 2024.
For the Quarter Ending June 2024
North America
Q2 2024 has been a dynamic period for Base Oil pricing in the North American region, characterized by a significant upward trajectory. The primary driver has been the consistent rise in crude oil prices, which serve as the feedstock for Base Oil production. Concurrently, global geopolitical tensions and resultant supply chain disruptions have exacerbated the situation, pushing up production costs. Refiners have also prioritized Base Oil output in response to competitive pressures from other fuels, leading to a 30% year-over-year surge in production.
During April 2024, several refiners including Safety Kleen and Avista Oil disclosed new markups in the paraffinic market, while Ergon, Process Oils, and San Joaquin Refining declared price hikes in the naphthenic market. ExxonMobil, HollyFrontier, Calumet, Motiva, and Paulsboro also announced the same to encounter the profit margins which resulted in a bullish market trend.
Seasonality played a crucial role, with participants stockpiling inventories ahead of the hurricane season and the summer driving surge. This proactive behavior indicated strong future demand, further solidifying the price rise. From the previous quarter in 2024, prices rose by 8%, reflecting a consistent upward momentum. Concluding this quarter, the price of Base Oil Group I SN 150 FOB Texas stood at USD 1715/MT, signifying a positive pricing environment.
APAC
In Q2 2024, the Base Oil market in the APAC region experienced a notable upward trajectory in pricing, influenced by several critical factors. Firstly, supply constraints due to maintenance shutdowns and operational disruptions in key production facilities significantly tightened the market. Secondly, heightened demand from downstream industries, particularly automotive and manufacturing, compounded the supply shortages, leading to increased competition and bid prices among buyers. Moreover, geopolitical tensions and logistical challenges further exacerbated the supply-demand imbalance, contributing to the bullish pricing environment. Focusing on China, which has witnessed the most substantial price changes, the overall market trend has been markedly positive. This, coupled with a shift towards more cautious purchasing behavior which sustained the upward price momentum. From the previous quarter in 2024, prices increased by 2%, indicating a steady climb throughout the year. The quarter concluded with the price of Base Oil l SN 150 FOB Qingdao standing at USD 810/MT. This increment in prices highlights a generally positive pricing environment, driven by robust demand and constrained supply.
Europe
Germany, experiencing the most pronounced price changes during the second quarter, from bearishness toward bullishness. While the overall trend was upward, the market also saw stabilization factors, including increased imports and local production resumption. In April 2024, Base oil activities remained muted due to the Easter holidays. Coinciding with the Ramadan festivities, many businesses across Europe opted to close their doors. This led to a significant decrease in trading activity, which declined the trend. However, during May 2024, the price trajectory in Germany reflected a combination of heightened operational costs and supply shortages. Seasonal shifts, such as the summer driving season, increased demand for lubricants, further influencing high prices during June 2024. Comparatively, prices in Q2 2024 were down by 1% from the same quarter last year, indicative of the market's slight contraction. However, within Q2, the second half saw a 6% price increase compared to the first half, driven by tightening supply and rising operational costs. Overall, the pricing environment in Q2 2024 was predominantly positive, characterized by supply constraints, increased logistics costs, and seasonal demand spikes, which collectively fostered a landscape of escalating prices despite some stabilizing influences.
MEA
The second quarter of 2024 has witnessed a pronounced increase in Base Oil prices across the Middle East region. This incline was driven by a confluence of factors, including a rising of freight rates, a supply shortage post-Ramadan amidst halted cargos and an overall rising demand arising from economic uncertainties and geopolitical tensions. The Saudi Arabia, in particular, experienced the most significant price adjustments. Post-Ramadan resurgence, base oil trading activity has picked up across the Middle East, particularly after the Eid al-Fitr holiday. This traditional buying period sees lubricant blenders replenish stocks to meet the growing rises in finished lubricant sales during April. Buyers were willing to pay more to secure the base oil they needed to meet lubricant production demands. Moreover, Luberef, a major player in the region has faced challenges securing vessels, impacting deliveries of Group I and II base oils typically sourced from Yanbu and Jeddah. Meanwhile, Base oil supplies remained under pressure in Saudi Arabia due to the ongoing shipping attacks. Attacks by Houthi rebels in the Red Sea were forcing ships to take longer routes around the Cape of Good Hope, impacting delivery times and availability.
For the Quarter Ending March 2024
North America
During the first quarter of 2024, the North American Base Oil market faced various challenges. The market experienced a decrease in demand during January 2024, mainly due to seasonal fluctuations and a slowdown in industrial activity. Additionally, the supply of base oil remained moderate to high, leading to an excess inventory and market saturation. Fluctuating crude oil and feedstock prices further contributed to the downward trend in prices. The US Base Oil market was particularly affected, witnessing a 2% decrease in pricing compared to the previous quarter.
However, the second half of the quarter saw a significant increase in prices in the US market, with a price percentage comparison of 9%. This increase can be attributed to the disruptions caused by the shutdowns and resulting supply constraints. These shutdowns added to the existing challenges faced by the market, which was already dealing with a bullish market trend of moderate demand and constraint supply.
To summarize, the first quarter of 2024 presented challenges for the North American Base Oil market, including reduced demand, market saturation, price revision, and disruptions caused by shutdowns.
Europe
The Base Oil market in Europe experienced a subdued performance throughout the first quarter of 2024 due to various factors. One of the primary reasons for this was the lack of demand for lubricants in industries such as process, industrial, and automotive oils. As a result, the market remained balanced with moderate to low demand and low to moderate supply. The market was also affected by logistics issues, particularly delays in the transit of Base oil cargoes through the Suez Canal and the Red Sea which dampened the enthusiasm and buyers were shifting away from long-term contracts, preferring spot purchases. Among European countries, Germany witnessed the most significant changes in Base oil prices in the first quarter. Prices experienced an 8% decrease compared to the previous quarter. The prices were sustained to some extent by positive crude oil values. At the end of the quarter, the latest price for Base Oil I SN 150 FD Hamburg in Germany was recorded at USD 1033/MT during March 2024.
APAC
The APAC region's Base Oil market experienced a relatively stable Q1 2024, with a few factors that impacted the market dynamics. Firstly, the consumption of most Base Oil grades softened, leading to a surplus in the market during January 2024. Secondly, the high freight rates and increased cost of freight due to bottlenecks in the supply chain increased the pricing dynamics during February 2024. Lastly, the demand for Base oils and lubricants ahead of the Lunar New Year celebrations in China, which start on Feb. 10 next year, created a slight increase in demand. In China, the prices of light-grade SN1 150 Base Oil remained stable, while heavy grades continued to rise by 1.3% during the third week of March 2024 due to reduced accessibility. Moreover, Shandong Jincheng Petrochemical in Zibo, Shandong, China kept its Group II Base oils unit under Maintenance Turnaround from early March to the next announcement which further contributed to a marginal increase in prices during March. Disruptions in the supply chain and reduced accessibility also played a role in the price dynamics. Despite these challenges, the market remained relatively stable during the quarter.
MEA
During the first quarter of 2024, the Base Oil market in the MEA region experienced a stable to bullish market situation. Prices remained relatively unchanged throughout January 2024. The ongoing shipping issues and reduced sailings through the Red Sea and the Suez Canal caused significant disruptions and led to higher Base Oil prices in the UAE. Despite these transportation problems, Luberef managed to maintain regular cargo shipments to the UAE ports during January 2024. However, the market took a sharp turn during the second half of the first quarter, coinciding with the arrival of Ramadan. Shipping issues, transportation disruptions, and limited oil deliveries were the top three factors impacting the market during this period. Adding fuel to the fire were delays and cancellations of Saudi base oil cargoes from Luberef. Ports like Fujairah, Jebel Ali, Ras Al Khaimah, and Hamriyah have experienced a shortage of large deliveries. This scarcity was attributed to a lack of vessels willing to navigate the volatile Bab-al-Mandeb Strait, a crucial shipping lane connecting the Red Sea to the Indian Ocean during this timeframe.
For the Quarter Ending December 2023
North America
The North American Base Oil market in Q4 2023 witnessed significant fluctuations due to various factors. The market was impacted by a tight supply and demand balance of Group I and II grades, leading to a surge in Base Oil prices during October.
Additionally, the impact of price increments for Base Oil in the previous month showed its reflections in November, leading to several independent lubricant manufacturers increasing their product prices. The Group I segment experienced a tight spot flow situation due to reduced Base Oil output at some refineries amidst ongoing turnarounds and unplanned production issues.
However, the US Base Oil market witnessed a notable drop of 2.1% by entering in December, following Chevron and Motiva's announced price decrement. The demand for Base Oil in the downstream lubricant industry declined during December as buyers aimed to minimize year-end inventories to avoid tax implications. The Q4 2023 trend for the US Base Oil market was bullish to bearish, and the prices for Base Oil Group I SN 150 FOB Texas settled at USD 1581/MT during December.
Europe
Relatively, the Base Oil market in Europe witnessed a bullish trend in Q4 compared with Q3. Despite the demand remaining low due to seasonal slowdown, holiday closures, and high borrowing costs, the supply of Base Oil remained high due to reduced production in other regions, shifting priorities, global market dynamics, and high inventory levels during October.
However, at the beginning of November, the market was impacted by several factors, including the recent price hike by ExxonMobil in Europe that raised Group I Base oil prices to record highs, resulting in a surge in prices in Germany, Netherlands, and Belgium.
Additionally, the European Base oil market has witnessed some strange pattern of short supply for API Group I grades which has created a gap and led the blenders to choose light Group II Base oil as an alternative. Moreover, coping with the regional market dynamics increased exports from other regions helped in supplementing the European market. Henceforth, the prices of Base oil in Europe admitted to a hike in comparison to the previous quarter.
APAC
The current quarter of 2023 (Q4) for Base Oil in the APAC region has seen a mixed market situation with October and November admitted a bullish trend, while December witnessed a significant drop. The top three factors that impacted the market were moderate demand and uncertainty about the downstream lubricant market.
China's Base Oil market experienced a 2.6% increase in price for Group I SN and remained stable for Group II Base Oil during October. The demand for different grades varied differently, with Group I SN markets showing an uptick in consumption levels, while the demand for Group II Base Oil was sluggish during December. The correlation price percentage for China in Q4 was 0.5%, indicating a weak correlation between crude oil prices and Base Oil values.
However, the quarter-on-quarter percentage change was 51%, indicating a significant change in the Base Oil market. The price percentage comparison of the first and second half of the quarter was 4%, indicating a slight increase in prices in the second half. The latest price of Base Oil l SN 150 FOB Qingdao in China in Q4 is USD 804/MT.
MEA
The fourth quarter of 2023 in the Middle East region witnessed a moderate market situation for Base Oil. Several factors influenced the pricing dynamics during this period. Firstly, there was a high supply of Base Oil cargoes from various within the regional market of Saudi Arabia during October. This continuous influx of supply restricted market players in the UAE from increasing prices.
Additionally, there was concern over war risk insurance premiums being imposed on shipping lines and marine agencies, which potentially led to increased prices of Base Oil cargoes during November. Group I Base oil has become more expensive in Saudi Arabia as the export from Yanbu and Jeddah has increased and reached a new high which followed a similar increase in international prices during this timeframe.
However, December saw an opposite trend where many blenders were willing to clear inventories ahead of the New Year. Henceforth, to excess the offtake, several traders were continuously clearing up their stocks which contributed toward the downtrend to settle at USD 1410/MT Base Oil Group-III 4cSt FOB Dammam, Saudi Arabia.
