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Home / INDUSTRY OUTLOOK – MAY

INDUSTRY OUTLOOK – MAY

Newsletters/ May 13, 2021

The months of May and June seem to be marked by the same market conditions, strong demand, and tight availability of base oils. Although some refineries are expected to end the maintenance or increase production, they will first try to cash in on the high base oils margins and firmer prices for fuel before having any pressure to clear new inventories.

While there are signs of seasonal demand in the Asia-Pacific region, the availability of base oils groups I-III gets worse during May since most of the refineries were on maintenance between March to May. As per the industry reports, Group I losses will be around 60,000MT, Group II losses will be around 36,000MT, and Group III losses will be around 55,000MT. Regional prices are firm, with blenders prioritizing their inventory rather than their costs.

Europe is still very dry on all groups. May base oils availability is expected to be as low as April for the export market – the whole availability for all groups being sold mainly to local markets. Group II prices are still on the rise, and delayed shipments from the US are impacting further the tight availability.

The European Market remains the main outlet as well for available Russian Group I base oils, from light to medium and heavy grades, decreasing the availability of volumes for export to overseas markets. The ease of lockdown in some European countries by May/June should boost lubes demand, impacting further the base oil supply/demand imbalance.

Latin America’s demand remains healthy, but prices keep getting higher and spot offers tighter. Blenders are open to switching from Group II to Group I due to a lack of availability out of the US. Heavy grades are the key question, with virtually no volumes being offered into the region. On the industrial side, more customers are switching from Paraffinic heavy grades to Naphthenic due to better prices. Re-refined base oils have increased their acceptance across the region. Almost every country is already importing or open to discussing it as a valid alternative.

In the US, refineries are starting to build inventories. Still, the spot market should not be getting healthier earlier than 3Q. Besides, there are big concerns regarding the disruptions which could be caused by the upcoming hurricane season.

On top of this, disruptions in the shipping industry bring higher costs to base oils importers all around the world and leave some regions without option since some trade lanes have been put on hold or canceled due to Suez Canal blockage or due to vessels overbooking way into June because by high demand for all kind of cargo.

What can you do?

Our trading team can assist with alternatives for virgin Paraffinic and Naphthenic base oils groups I-IV or re-refined base oils. Get in touch today with our representatives to receive customized offers as per your needs.