Americas/EMEA base oils - week of April 24: Demand outlook

·        US flash April purchasing managers’ index points to healthy growth, contrasting with recent signs of slowing economic activity.

·        US interest rates expected to be raised one more time in May, before pausing.

·        US gasoline consumption rises last week for fourth week.

·        Signs of blenders’ moves to hold lower stocks assumes steady availability of supply.

·        This assumption is riskier during Atlantic hurricane season, which officially begins at beginning of June.

·        Refiners responding to steadier, more gradual demand would take time to readjust output to cover sudden rise in demand.

·        US posted price cuts could boost demand from blenders that had held back on concern about exposure to such a price-cut.

·        Americas lube demand growth outpaces supply at start of year for sixth month amid steady consumption in Latin America.

·        Steady monthly demand in Latin America contrasts with sharper monthly changes in US consumption, complicating refiners’ ability to maintain stable supply/stocks.

·        Sustained rise in Latin Americas' automobile sales in March points to ongoing underlying support for regional lube demand.

·        Latin American buyers continue to tap Asia suppliers for Group II heavy grades.

·        Trend reflects more the still-competitive Asia-Pacific prices vs US prices rather than unusual rise in heavy-grade demand.

·        Europe’s flash April services PMI extends rises; manufacturing PMI falls.

·        Diverging performance of services and manufacturing extends recent trend, supporting PCMO consumption.

·        France’s firm PCMO demand in February illustrates that trend, mirrors other markets in Europe and in other regions.

·        Europe and UK expected to raise interest rates again in May as core inflation stays high.

·        Europe’s March car sales extend rise, led by surging alternative-fuel-vehicle sales.

·        France’s February lube demand falls, contrasting with steadier consumption in other markets.

·        Muted demand and uncertainty about outlook reinforces blenders’ preference to hold lower inventories.

·        Europe’s shrinking lube demand early this year contrasts with firm growth in Americas and Asia-Pacific.

·       Europe’s lube demand likely to get seasonal boost in coming months, later than usual, and after Asia.

·        Rise in Europe’s demand typically coincides with Asia demand peaking around end of Q1.

·        Simultaneous rise in demand typically magnifies impact on prices.

·        Rise in Europe’s demand this year likely to take place after Asia demand peaks.

·        Seasonal rise in demand at different times in Europe and Asia likely to curb price-impact of stronger demand.

·        Base oils prices still likely to reflect different demand dynamics at different times in the Asia and European markets.

·        West African markets like Nigeria and Senegal secure more regular supplies from sources like UK, Italy, US, countering slowdown in shipments from Russia.

·        More regular flows to Africa reflect persistent surplus in those markets.

·        West Africa buyers face risk of slowdown in shipments if supply tightens in those markets.

·        Risk may be even larger for suppliers if West Africa buyers line up supplies from other sources instead.

·        Relative risk to suppliers reflects current structural oversupply in global base oils market and need for regular outlets to clear surplus volumes.

·        Nigeria continues to take delivery of shipments from different regions, despite financing difficulties.

·        Shipments suggest lack of Russian base oils cargoes to Nigeria reflect other factors that complicate such flows.