Americas/Europe base oils – week of June 19: Demand outlook

·        US gasoline demand rises in early June for twelfth week.

·        Americas blenders likely to maintain lower stocks in face of high cost of money and prospect of weaker demand.

·        US blenders’ lower stocks leaves them more exposed to any unexpected supply disruptions during Atlantic hurricane season.

·        Brazil’s demand for overseas supplies likely to hold steady amid signs of balanced supplies.

·        US likely to be key beneficiary of steady demand from Brazil as competitive prices make less workable the arbitrage from other regions.

·        Firmer European demand for Group II base oils in Q2 2023 boosts attraction of moving more US shipments to the region and cuts need to move European supplies to US.

·        Combined effect is to cut Group II supplies in US market.

·        West Africa takes delivery of growing volumes from US in 1H 2023.

·        Trend reflects US refiners’ move to clear swathe of surplus supplies, and buyers’ moves to line up alternative volumes amid drop in shipments from Europe/Russia.

·        Trend highlights importance of West Africa as outlet for surplus supplies, and ready availability of surplus supplies.

·        Italy’s lube demand extends fall in April year on year as PCMO consumption slides.

·        Trend points to ongoing fall in Europe’s lube demand through Q2 2023.

·        Industrial oils had been key factor behind Europe’s lube demand weakness, with PCMO demand slowing the contraction.

·        Weakening PCMO demand would remove that support.

·        Spain’s lube demand falls in April yoy for first time in three months, adding to signs of more widespread slowdown in consumption throughout Europe.

·        Extension of year-on-year fall in lube demand would magnify seasonal slowdown in consumption in Q3 2023.

·        Germany’s lube demand likely to compound regional weakness in Q2 after March consumption got a smaller seasonal boost than usual.