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 Prices 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.
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Saudi Arabia
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.
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