In Q4 2023, the North American Base Oil prices experienced significant fluctuations driven by multiple factors. Initially, the market saw a surge in Base Oil prices during October due to a tight supply and demand balance of Group I and II grades.
Subsequently, the impact of price increases in the preceding month reverberated into November, prompting several independent lubricant manufacturers to raise their product prices. Within the Group I segment, a tight spot flow situation emerged due to decreased Base Oil output at certain refineries amidst ongoing turnarounds and unforeseen production issues.
However, the US Base Oil market witnessed a notable 2.1% drop as December commenced, following announcements of price reductions by Chevron and Motiva. Concurrently, demand for Base Oil in the downstream lubricant industry dwindled in December as buyers sought to minimize year-end inventories to mitigate tax implications.
The Q4 2023 trend for the US Base Oil market fluctuated from bullish to bearish, with prices for Base Oil Group I SN 150 FOB Texas settling at USD 1581/MT in December.
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In Q4, the Base Oil market in Europe displayed a bullish trend compared to Q3. Despite persistently low demand due to seasonal slowdowns, holiday closures, and elevated borrowing costs, Base Oil supply remained abundant. This surplus was attributed to reduced production in other regions, shifting priorities, global market dynamics, and high inventory levels throughout October.
However, at the onset of November, the market faced several influences, notably ExxonMobil's recent price hike in Europe, which propelled Group I Base Oil prices to unprecedented levels. Consequently, prices surged in Germany, Netherlands, and Belgium.
Furthermore, the European Base Oil market encountered an unusual pattern of short supply for API Group I grades, prompting blenders to turn to light Group II Base Oil as a substitute. Additionally, in response to regional market dynamics, increased exports from other regions bolstered the European market. Consequently, Base Oil prices in Europe saw an uptick compared to the previous quarter.
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