Americas/EMEA base oils demand outlook: Week of 31 March

·         US base oils demand typically rises around this time of year to meet seasonal pick-up in lube consumption.

·         US spot base oils prices mostly hold steady, even with round of plant maintenance work and higher crude oil prices that keep margins under pressure.

·         Steady prices, despite rangebound margins and lower supply, suggest demand is lower than usual and lower than expected for the time of year.

·         Buyers have added incentive to hold back this week ahead of expected announcement of additional US tariffs on imports.

·         Uncertainty about size, extent and impact of tariffs adds to incentive to hold back.

·         Uncertainty highlights impact of tariffs even before their implementation.

·         Overseas demand for US supplies could also be slower than usual amid similar concern about impact of tariffs.

·         Uncertainty boosts overseas’ buyers incentive to procure smaller volumes and to diversify their supply sources.

·         Any such moves to diversify supply sources could be complicated by tight supply and closed arbitrage from Europe and Asia to Americas markets.

·         Latin America’s base oils demand could face additional pressure from concern about weaker lube consumption even ahead of any tariff-related pressures.

·         Slower lube consumption adds to buyers’ caution and preference to hold lower stocks.

·         Preference for lower stocks boosts attraction of securing smaller volumes more locally.

·         Argentina’s demand for base oils supplies from overseas markets could stay more muted even if country’s lube consumption extends recent recovery.

·         Revival in demand should boost its requirements for overseas supplies, especially from US.

·         Argentina’s slump in base oils imports in 2024 reflected its ability to cover more of its requirements from domestic sources.

·         That trend could continue this year if buyers seek to bypass uncertainty about any changes in trade-related costs.   

·         Europe’s base oils demand could stay more mixed even with seasonal pick-up in requirements.

·         Demand could be stronger for base oils supplies whose availability is deemed to be tighter.

·         Other grades with more plentiful availability give buyers the leverage to continue to procure smaller volumes more frequently.

·         Uncertainty about lube market outlook adds to incentive for blenders to maintain lower inventories.

·         Improving economic sentiment in market like Germany could precede pick-up in industrial activity and lubricants demand.

·         Imposition of US tariffs could hamper any recovery in economic activity.

·         Uncertainty about outlook coincides with ongoing signs of weak lube consumption in Q1 2025.

·         Italy’s lube demand falls in Feb 2025 for seventh month from year-earlier levels.

·         Falling consumption contrasts with firmer lube demand in other markets like Spain early this year.

·         Mixed demand signals and healthy availability of premium-grade base oils give buyers the option to procure additional supplies as required.

·         Europe’s high Group I export prices and limited supply incentivize overseas buyers to target shipments from other sources like US and Asia.

·         Europe’s Group I brightstock export price premium to CFR India price widens in March 2025.

·         US brightstock export price flips to rare discount to CFR India price in recent weeks, reflecting that dynamic.

·         Demand in West Africa markets like Nigeria could ease as sustained pick-up in shipments to the country leaves the country with healthy supplies.

·         Global base oils exports to Nigeria rise in Jan 2025 to second-highest level in more than a year, leaving total shipments in last three months at highest level in more than five years.

·         Supply likely to get further boost amid signs of steady flow of shipments from US, Europe and South America to Nigeria in Feb-March 2025.