Americas/EMEA base oils demand outlook: Week of 3 March

·         US base oils demand likely to get boost from blenders’ moves to build stocks ahead of seasonal pick-up in consumption.

·         Steady prices and more manageable supply-surplus in early-2025 ease concern about exposure to lower prices, removing deterrence to holding back.

·         More balanced fundamentals would also cushion against any pressure from lower feedstock costs.

·         Typical rise in prices during spring oil-change period instead adds to incentive to lock in supplies at current prices.

·         US base oils export prices maintain narrower discount to domestic prices compared with Q1 2024.

·         Narrower export-price discount provides further support for steady-to-firmer domestic prices.

·         Concerns about strength of pick-up in demand could support ongoing caution.

·         Uncertainty about possibility, timing, and impact of tariffs on domestic and overseas lube demand boosts attraction of limiting size of any stock-build.

·         Uncertainty boosts attraction of procuring smaller volumes more frequently.

·         Uncertainty, and possibility of smaller seasonal pick-up in demand in response, could curb refiners’ leverage to adjust prices.

·         Europe’s demand for Group II base oils from the US could stay lower early this year as regional output covers more of that market’s requirements.

·         Slump in Europe's output in early 2024 coincided with open arbitrage and surge in the region’s imports from US in Q2 2024.

·         Rise in imports provided US refiners with attractive outlet for larger volume of their supplies.

·         Likely lack of any repeat of that scenario this year would leave US refiners needing to target other markets instead.

·         Latin America’s base oils demand likely to get support from tighter supply at end-2024 combined with firm consumption in early-2025.

·         Brazil’s base oils demand likely to hold firm after lube consumption extends rise in Jan 2025.

·         Rising demand puts more pressure on Brazil’s tighter base oils supply-balance, especially vs Q1 2024.

·         Concern about slowdown in Brazil’s economic growth, and expectations of more plentiful surplus base oils supply in US, instead incentivize blenders to hold back early this year.

·         Rising domestic demand and delayed replenishment moves raise prospect of further squeezing Brazil’s supply-balance.

·         Argentina’s lube demand rises in Jan 2025 for second time in three months and at fastest pace in more than a year.

·         Pick-up in Argentina's economic activity raises prospect of supporting extended recovery in lube consumption.

·         Rising demand would boost requirements for additional base oils supplies, especially from US.

·         Rising demand could complicate increasingly regular flow of Group I base oils shipments from Argentina to Brazil unless domestic output rises accordingly.

·         Peru’s base oils and lube imports rise in Jan 2025 for fourth month from year-earlier levels.

·         More than 95% of Peru’s base oils imports originate from US in Dec 2024 and Jan 2025, with scant volumes from South Korea.

·         Trend coincides with less feasible arbitrage from Asia to Americas, highlights Latin America’s larger reliance on US for its overseas supplies.

·         Chile’s base oils/lube imports fall in Jan 2025 for second month from year-earlier levels.

·         Imports dip even amid signs of firmer economic growth in Chile at end-2024.

·         Europe’s base oils demand likely to get support from seasonal pick-up in requirements.

·         Europe’s weak lube demand meanwhile incentivizes blenders to maintain low stocks.

·         Italy’s lube demand falls in Jan 2025 for sixth month, reflecting extension of weak consumption into start of this year.

·         Blenders’ low stocks increase their need to replenish inventories more frequently.

·         Blenders’ low stocks could magnify impact of factors such as seasonal rise in consumption.

·         Expectations of sufficient base oils supply raise prospect of limiting size of seasonal pick-up in requirements.

·         Premium of domestic Europe Group I brightstock over US prices widens to highest since July 2024.

·         Widening premium boosts attraction of moving more US brightstock shipments to Europe.

·         Dynamic highlights firm demand and tighter regional availability of the heavy-grade product.

·         Any subsequent pick-up in shipments to Europe could curb availability for other markets like West Africa.

·         Europe's demand for Group II base oils could face pressure from Group III prices whose discount to Group II prices widens further in Feb 2025.

·         Signs of healthy availability of Group II base oils could add to pressure to make adjustments to boost demand.