Americas/EMEA base oils demand outlook: Week of 28 April

·         US base oil demand likely to stay cautious amid persistent uncertainty about outlook for economy and costs.

·         Base oils prices hold steady even with lower feedstock prices in April 2025.

·         Lower feedstock prices raise concern about exposure to lower base oils prices, incentivizing buyers to hold back.

·         Steady prices could conversely ease those concerns and prompt buyers to resume procurement plans.

·         Steady prices and firmer base oils margins could also curb expectations of a rise in posted prices.

·         Expectations that prices are more likely to hold steady curb urgency to lock in additional volumes at current price levels.

·         Concern about slower lube demand and preference to maintain low stocks could complicate blenders’ strategy ahead of and during Atlantic hurricane season.

·         Concern about weather-related supply disruptions during that period typically prompts blenders to build additional stocks as a buffer.

·         Any such moves could be more muted this year because of concern about economic outlook.

·         Any moves to maintain lower stocks would leave market more exposed to impact of any weather-related supply disruptions.

·         Latin America’s base oils demand could face additional pressure from signs of more widespread slowdown in lube consumption.

·         Argentina’s lube demand falls in March 2025 for first time in three months and at steepest pace in five months.

·         Fall in lube demand contrasts with recent signs of economic recovery.

·         Fall in lube demand precedes US imposition of tariffs on most imports and subsequent expectations of slowdown in global economic growth.

·         Fall in lube demand and uncertainty about outlook could prompt blenders to pause any moves to replenish stocks and to instead keep low inventories.

·         Any such moves would cut domestic demand for overseas base oils supplies.

·         Argentina continues to tap tight global supply and firm overseas demand for Group I base oils, especially of heavy grades.

·         Argentina’s Group I base oils exports rise in March 2025 to highest in more than a decade.

·         Argentina’s shipments in Feb 2025 and March 2025 move to Nigeria.

·         Another large cargo loads from Argentina in H2 April 2025, with Nigeria a likely destination.

·         Dynamic likely to continue while global prices for Group I brightstock especially stay unusually high.

·         Brazil and Argentina’s firm domestic output and lower imports in recent months point to healthy or rising domestic demand for Group I base oils.

·         Trend contrasts with other markets where demand is rising more for premium-grade base oils.

·         Buyers in Africa markets like Nigeria turn increasingly to supplies from Americas rather than Europe to cover larger share of their requirements.

·         Markets like West Africa in turn provide valuable outlet for surplus supplies from Americas.

·         US accounts for more than 65% of global shipments to Nigeria in eight months to Feb 2025, up from 22% share in H1 2024 and 46% share in 2023.

·         US’ rising share of exports covers for drop in shipments from Europe, reflecting that market’s increasingly tight spot availability of Group I base oils.

·         Dynamic could face further change over coming year as new base oils production capacity starts to come online in various markets.

·         Additional supply could provide buyers in markets like West Africa with alternative supply options. 

·         Europe’s base oils demand likely to stay mixed.

·         Europe’s lube demand could continue to trend lower amid forecasts of weaker-than-expected economic growth.

·         Concern about weak demand, as well as more volatile feedstock prices in recent weeks, incentivize buyers to maintain lower stocks.

·         Buyers face challenge of balancing those concerns with meeting seasonal pick-up in demand.

·         Europe’s Group I base oils demand likely to get support from tight availability, boosting incentive to lock in volumes.

·         Firm Group I export prices relative to domestic prices point to sustained demand from overseas buyers despite tight availability and high prices.

·         Europe’s Group I base oils exports to markets outside the region slump in Feb 2025 from the previous month.

·         Lower exports highlight more limited spot availability to clear in Q1 2025, with trend extending into Q2 2025. 

·         More limited spot availability forces overseas buyers to raise bid levels or seek supplies from other sources.

·         Europe’s Group II base oils demand could face pressure from competitive Group I and Group III prices, as well as signs of healthy availability of supply.

·         Healthy availability of supply gives buyers leverage to procure smaller volumes as and when required.

·         Base oils demand in Middle East could stay more muted.

·         Signs of sufficient base oils exports to Middle East in March 2025 follow surge in shipments to the region in Feb 2025.

·         Blenders’ replenished stocks curb urgency to seek additional volumes.

·         Volatile crude oil prices and expectations of improving supply in Asia add to incentive to hold back.