Americas/EMEA base oils demand outlook: Week of 17 March

·         Seasonal boost in US base oils demand could be more muted than expected, with uncertainty about end-user consumption incentivizing buyers to maintain lower stocks.

·         Seasonal rise in demand typically cuts surplus supplies and often coincides with plant maintenance work, like this year.

·         Stronger demand and tighter supply typically give refiners more leverage to adjust prices to reflect those firmer fundamentals.

·         US outright base oils prices mostly hold steady, while price margins lag sharper rise in margins in Europe and Asia.

·         Lagging prices point to weaker-than-expected supply-demand fundamentals for time of year.

·         Demand for base oils supplies that face risk of additional tariff-related costs could get boost as buyers seek to secure additional volumes ahead of such a rise in costs.

·         Buyers face risk of imposition of tariffs before the supplies reach the US.

·         Latin America’s base oils demand likely to get seasonal boost, after signs of firm regional consumption so far this year.

·         Firm consumption limits supply-build late last year and early this year, boosting need to replenish stocks.

·         Firm consumption contrasts with sustained slowdown in US base oils exports to South America at end-2024 and start of 2025.

·         Fall in US shipments to Brazil and Argentina is especially steep.

·         Slump in US exports to Brazil and Argentina likely to squeeze further their tighter supply-demand balance, increasing need for replenishment supplies.

·         Slump in US exports to Brazil and Argentina contrasts with US’ still-high total base oils and lube exports in late-2024 and early this year.

·         Dynamic highlights impact of surge in shipments to Mexico and Africa, squeezing availability for other more regular outlets.

·         Europe’s base oils demand shows signs of getting stronger seasonal boost, with buying interest especially focused on products with tighter availability, such as Group I heavy grades.

·         Europe's domestic Group I brightstock premium to US export prices holds at highest level since late-2022.

·         High premium facilitates arbitrage from US, points to demand continuing to outpace supply.

·         More plentiful availability of other base oils grades gives buyers the flexibility to limit any stock-build and to procure smaller volumes more frequently.

·         Demand for Group I and Group III base oils could get support from their supply sources mostly being outside the US, curbing the impact of any tariffs.

·         Increasingly competitive prices of Group I and Group III base oils relative to Group II base oils add to their attraction.

·         Ongoing strength of Europe Group II prices relative to other grades and other regions could point to firmer-than-expected supply-demand fundamentals.

·         Any signs of pick-up in industrial activity in Europe would support firmer lube consumption, boosting requirements for additional base oils supplies.

·         Lube demand already shows signs of steadying in some markets.

·         Spain’s lube consumption rises in Jan 2025 for second month from year-earlier levels.

·         Firmer demand at start of 2025 adds to pick-up in consumption in other markets like Poland.

·         Any extension of trend would magnify seasonal rise in consumption during springtime.

·         Turkey’s base oils demand remains focused on supplies of Russian origin.

·         Group I base oils shipments from Russia account for more than 60% of Turkey’s total Group I imports in Jan 2025.

·         Share is largest in more than a decade, contrasts with slump in share of supplies from Europe.

·         Dynamic reflects competitive price of base oils of Russian origin compared with supplies from Europe.

·         Dynamic also reflects limited outlets for supplies of Russian origin and more limited surplus availability of European origin.

·         Dynamic also points to prices in other markets at higher levels for any such surplus supplies of European origin.