Americas/EMEA base oils - week of May 8: Demand outlook

·        US central bank expected to pause on additional interest-rate increases, with US economy already facing growing pressure from wave of rate-increases over past year.

·        US gasoline demand rises in last week of April for sixth week, but at slowest pace in more than a month.

·        US base oils demand likely to get support from belated round of stock replenishment after blenders held off in Q1 and early Q2.

·        Fall in US posted prices in April eased concern about exposure to lower prices, raising prospect of pick-up in demand.

·        Fall in crude oil prices in recent weeks could revive concern of lower prices, adding to buyers’ caution.

·        Recent/ongoing US base oils supply overhang highlights impact of prices on domestic/overseas demand.

·        US base oils exports typically rise in month of February, cushioning seasonal slowdown in domestic demand early in the year.

·        Fall in US base oils exports in February instead compounded impact of weak domestic demand.

·        Slump in demand highlights cost of prices that limited arbitrage opportunities to move surplus supplies to overseas markets.

·        US prices faced prospect of falling more than required to clear surplus that became unnecessarily large.

·        Europe’s central bank likely to raise interest rates further amid ongoing fight to control inflation.

·        Europe’s economic growth likely to remain muted over coming months.

·        Europe’s lube demand likely to hold firm through Q2, even if staying below year-earlier levels.

·        Firm demand boosts need for blenders to replenish base oils inventories.

·        Base oils demand could get further support from blenders’ shorter timeframe to replenish stocks that are lower than usual.

·        Europe’s February lube demand rose to three-month high.

·        Blenders held off replenishing stocks in Q1 even amid widespread pick-up in consumption vs end-2022.

·        Blenders’ base oils stocks likely fell to lower-than-usual levels as they held off replenishing inventories even as demand rose.

·        Falling crude oil prices and weak economic growth complicate blenders’ current stock-replenishment plans, add to incentive to maintain lower inventories than usual.

·        European blenders procured more base oils supplies than they required in 1H 2022, leaving overhang of high-priced surplus supplies that took time to clear.

·        Blenders show signs of avoiding a repeat of last year’s move by procuring smaller volumes of base oils.

·        Trend raises prospect of avoiding repeat of sustained slowdown in demand in 2H 2022 as blenders keep topping up stocks.