Americas/EMEA base oils demand outlook: Week of 21 Oct

·        US base oils demand likely to stay muted as buyers focus on working down feedstock and finished lube inventories over coming weeks.

·        Prospect of sufficient supply, and ongoing fall in base oils prices, adds to attraction of holding back.

·        Overseas demand for US supplies could be more mixed, with more muted buying interest in Latin America and firmer demand in Europe and India.

·        Latin America’s base oils demand for US supplies could be more muted amid more balanced regional supply fundamentals in Q4 2024.

·        Region’s lube demand falls in Aug 2024 for first time in three months amid sliding consumption in Mexico, Argentina.

·        Any extension of demand contraction would compound likely seasonal dip in region’s lube demand in Q4 2024.

·        Lower demand, steady regional output and steady exports from US to Latin America would likely flip recent supply shortfall back to surplus.

·        Weakening demand fundamentals would curb buyers’ need for marked pick-up in arbitrage shipments from US over coming months.

·        Any such pick-up in shipments could instead leave Latin America with growing surplus.

·        Mexico’s lube demand falls in Aug 2024 for ninth time in ten months as automobile and industrial oils consumption slides.

·        Sustained slowdown in demand puts pressure on Brazil’s lube consumption to keep growing to avoid steeper drop in Latin America’s lube demand.

·        Chile’s three-month-average base oils imports fall in Sept 2024 for second time in three months.

·        Chile’s base oils imports duly fall in Q3 2024 from year earlier for first time in a year.

·        Chile’s base oils imports rise in Sept 2024 from year earlier for first time in three months, suggesting slowdown could be bottoming out.

·        Chile’s muted rise in imports in Jan-Sept 2024 from year-earlier levels suggest any sustained recovery is likely to be small. 

·        Europe’s weak lube demand likely to continue to incentivize blenders to maintain lower base oils inventories.

·        Lube demand in some of Europe’s largest markets falls in Aug 2024 for third time in four months.

·        Sliding demand compounds seasonal dip in consumption during summer months.

·        Falling demand contrasts with regional base oils prices that incentivize overseas refiners to target Europe with more supplies.

·        Trend raises prospect of Europe supply outpacing demand.

·        That scenario shows signs of already materialising from Q2 2024 and into start of Q3 2024.

·        Any extension of that trend through rest of Q3 2024 could put more pressure on adjustment in supply or prices.

·        Europe’s Group I prices begin to stabilize relative to premium-grade base oils.

·        Steadier prices follows slide in Group I prices relative to premium-grade base oils in recent weeks even with signs of increasingly plentiful premium-grade supplies.

·        Recent shipments to markets like West Africa and southeast Asia point to sufficient Group I supply despite structural drop in regional output.

·        Dynamic points to weaker Group I base oils demand relative to premium-grade base oils.

·        Europe’s Group II base oils demand could be more muted as steady availability gives buyers option to procure on need-to basis.

·        Europe’s Group III base oils demand could get support from competitive price vs Group II base oils.

·        Signs of ready availability of supply, despite plant maintenance work, adds to attraction of using more Group III base oils.

·        Ready availability of supply partly reflects benefit of multiple supply sources.

·        Demand in Middle East could hold steady amid signs buyers maintained sufficient inventories, curbing urgency to buy.

·        South Korea’s base oils exports to Middle East fall less sharply than to other outlets in Sept 2024.

·        Steadier flows help to sustain buyers’ stocks at comfortable levels, cushioning impact of signs of delayed pick-up in arbitrage shipments from US.