Americas/EMEA base oils demand outlook: Week of 25 August

·         US base oils demand likely to stay cautious in face of healthy availability of supply and lower crude/diesel prices.

·         Weaker fundamentals and lower feedstock prices increase exposure to risk of drop in outright prices.

·         Recent drop in Group I/Group II domestic prices could ease some of the downward price-pressure.

·         Recent drop in domestic prices reverses recent rise in premium of domestic prices over export prices, especially for light grades.

·         Feasible arbitrage to multiple overseas markets could curb speed and size of any rise in surplus supplies in domestic market.

·         Signs that supply-surplus remains manageable could support steadier domestic demand.

·         Buyers could seek to maintain sufficient stocks as buffer against unexpected supply-disruptions at time of year when activity during Atlantic hurricane season typically rises.

·         Fire at major blending plant in US Gulf coast market highlights risk of unexpected supply-disruptions and importance of maintaining sufficient sources of supply.

·         Fire could trigger rise in demand for replacement lube supplies from alternative sources. 

·         Latin America’s base oils demand could get support from blenders’ tight inventories heading into Q3 2025.

·         Latin America’s lube demand falls in June 2025 for third time in four months from year-earlier levels.

·         Demand still exceeds base oils supply in June 2025 for second month and for sixth time in eight months.

·         Weaker lube consumption and signs of blenders’ preference to maintain lean stocks could curb extent of any pick-up in demand for replenishment base oils supplies.

·         Expectations of sufficient availability of supplies from overseas markets, and concern about lower prices for those supplies, add to attraction of maintaining lean stocks.

·         Brazil’s lube demand edges up in July 2025 after falling in each of the previous four months.

·         Steadier lube demand consumes existing feedstock supplies faster, adds to country’s requirements for sustained flow of large import volumes to cover requirements.

·         Those immediate requirements could be larger than usual to make up for sharp dip in US exports to Brazil at end-Q2 2025.

·         Mexico’s industrial lube demand falls in June 2025 for fourteenth straight month.

·         Mexico’s automobile lube demand rises in June 2025 for third time in four months.

·         More mixed lube-demand growth trends could boost requirements for certain base oils grades and cut demand for others.

·         Europe’s Group I base oils demand could see more muted seasonal recovery in coming weeks if blenders adjusted formulations to use more premium-grade base oils.

·         Tighter Group I supply earlier this year could have incentivized such moves.

·         Europe’s Group II base oils premium to Group I base oils stays wider than usual in recent months.

·         Wider Group II premium could reflect such moves to use more premium-grade supplies in place of Group I.

·         Europe’s Group I base oils exports to markets outside the region rebound to five-month high in June 2025.

·         Exports rebound even during round of Group I plant-maintenance in Europe in Q2 2025.

·         Rise in Group I exports contrasts with fall in Europe’s total base oils exports to markets outside the region in June 2025.

·         Dynamic could reflect firmer regional demand for premium-grade base oils and weaker demand for Group I base oils, leaving more supplies for export.

·         Demand in Middle East could ease after recent surge in shipments from Asia suppliers like South Korea leaves stocks at more elevated levels.

·         South Korea’s base oils exports to Middle East rise to sixteen-month high in July 2025.

·         Rise in exports in July 2025 points to firm demand for spot shipments in Middle East.

·         Rise in exports coincides with tighter availability of Group I heavy neutrals and increasingly competitive Group II prices in Middle East market.

·         Increasingly-ready availability of Group II supplies and uncertainty about Group I supplies adds to attraction of procuring more premium-grade base oils.

·         Even so, Asia’s shipments to Middle East surge at time of year when demand faces seasonal slowdown.

·         Slower demand likely to curb pace of consumption of existing supplies.

·         Healthy inventories in Middle East could curb subsequent demand for additional volumes from other regions.