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Updated to Q4 2020
Group I base oil supply is expected to be snug entering Q4 as refinery rates continue to be tempered from normal rates. Heavier-viscosity grades and brightstock are expected to be snug to tight into October. Refiners could increase rates, but are expected to monitor fuels demand alongside and adjust accordingly. The coronavirus pandemic will continue to weigh on operations. South American production is expected to be limited.
Group I base oil demand is expected to be strong entering Q4, amid globally tight conditions, especially for heavier viscosities and brightstock. The coronavirus pandemic continues to weigh on demand to some extent, albeit stronger compared with Q2. Demand remains strong in South America amid limited local production.
Group II base oil supply enters the quarter tight with Motiva and Excel Paralubes having shut their units ahead of Hurricane Laura. The area’s power grid was catastrophically damaged, and restoration remained the obstacle to restarts. The US should be able to supply domestic term customers, but supply for spot sales or spot exports are not expected. Supply will improve with refinery restarts in October.
Group II base oil demand is theoretically strong because of robust demand in India and Brazil, both of which face shortages of material. However, with temporary outages due to Hurricane Laura, the US may not be able to supply for a few months until production returns and some inventory is rebuilt. Domestic demand is steady but muted from normal levels as it recovers from the coronavirus pandemic.
Group III supply levels are expected to be snug starting Q4 as maintenance in other regions is taking place. Contract customers are expected to be able to secure sufficient product, but there will be little left for spot sales.
Group III demand may incrementally improve as coronavirus restrictions ease further. Much will depend on how much US drivers are on the road and taking regular car maintenance. Factory fill demand is still expected to be a slower recovery amid wider macroeconomic uncertainty around the automotive industry.
We offer the following regional Base oils-Lubes analysis and news coverage to keep you informed of factors and developments affecting prices in the Base oils-Lubes marketplace.
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