Americas/EMEA base oils - week of Apr 10: Demand outlook

·        Signs of slowing US economic growth raise expectations that any interest-rate rise in May is likely to be the last.

·        US gasoline demand rises last week for second week and at fastest pace in more than a year.

·        Rising cost of money and borrowing incentivizes blenders to maintain cautious procurement strategy even after spike in crude prices last week.

·        Blenders’ expectations that supply will remain sufficient even amid seasonal rise in demand curbs need to hold larger stocks.

·        US domestic/overseas base oils/lube demand exceeds supply in January.

·        Trend needs to continue over coming months to reverse supply-build and support prices.

·        US blenders’ caution over inventory levels could require refiners to adjust usual production strategies to maintain trend of demand exceeding supply.

·        Europe’s economic growth stays weak but firmer than expected. Prospect of further rise in interest rates to keep pressure on growth outlook.

·        France’s March car sales rise 24pc yoy, climb for seventh time in eight months.

·        UK’s March car sales rise for eighth month; alternative-fuel vehicle sales account for more than 50pc of total for seventh month.

·        Rebounding crude oil prices raise expectations of higher base oils prices, incentivizing Europe’s blenders to replenish stocks.

·        Round of stock replenishment would be from lower-than-usual inventory levels.

·        Signs of rising month-on-month European lube demand in Q1 2023, and blenders’ reluctance to replenish stocks, suggests they preferred to work down existing inventories.

·        Prospect of procurement of smaller volumes would require more frequent rounds of stock-replenishment.

·        Trend would sustain steadier demand instead of surge then pause in demand.

·        Europe’s January lube demand falls more slowly, rises from December. Trend shows signs of continuing through rest of Q1 2023.

·        Turkey’s falling imports from Russia in February highlight Russia’s limited alternative outlets for its supplies.

·        Europe’s base oils supplies to Turkey rise in February and also move to other outlets like Mideast Gulf and Latin America – highlighting more diverse options to clear surplus supplies.

·        Turkey’s imports from Europe rise in February after prices fall to smaller premium to prices for Russian supplies.

·        Trend likely to keep pressure on prices for Russian base oils to maintain steep discount to European supplies to deter recurrence of such moves.