Americas/EMEA base oils – week of June 12: Demand outlook

·        US economic growth shows signs of slowing but remains unexpectedly firm.

·        US weekly gasoline demand rises for eleventh week; pace of increase slowest in more than a month.

·        More US refiners cut posted prices, narrowing posted price premium to spot prices.

·        Lower US posted prices could spur pick-up in demand from blenders that had held back in anticipation of such a move.

·        Size of rise in demand could be muted if lower buying interest instead reflected blenders’ moves to hold lower inventories than previously.

·        Demand typically gets support ahead of/during Atlantic hurricane season as companies build buffer-stocks in case of supply disruptions.

·        Any lack of such a move leaves buyers and sellers exposed to unexpected disruptions – magnifying the impact of those disruptions.

·        Steady flows of Group I base oils from Indonesia to Latin America reflect open arbitrage and steady demand for products like bright stock.

·        Latin America’s firm lube consumption in March contrasts with slide in US demand, adding to attraction of targeting that region with base oils supplies.

·        Brazil’s demand for overseas supplies likely to hold steady amid relatively balanced supply-demand fundamentals in recent months.

·        Eurozone’s economy shrinks in Q4 2022 and Q1 2023, faces more pressure in coming months from rising interest rates.

·        UK’s May car sales rise for tenth month.

·        UK’s May sales of alternative-energy vehicle sales hold above 50pc of total sales for ninth month.

·        Europe’s lube demand shows signs of slowing in early Q2 from March, extending year-on-year contraction.

·        Trend adds to blenders’ preference and flexibility to hold lower inventories.

·        Trend likely to leave blenders with more balanced feedstock supplies heading into Q3 2023, contrasting with large surplus the same time a year earlier.

·        Trend would support steadier demand in Q3 2023 vs same time last year.

·        Europe’s Q2 2023 Group II supplies from US show signs of staying lower than usual, keeping fundamentals relatively balanced.

·        Lack of supply-build likely to limit extent of any downward price-pressure in Q3 2023.

·        Turkey’s Group I base oils demand for supplies of Russian origin could rise as plant-maintenance work cuts availability from Mediterranean region in Q2 2023.

·        Access to Turkish market increasingly important for Russian supplies in view of limited alternative outlets.

·        Completion of plant maintenance in Europe/Russia in Q2 likely to boost competition for buyers in Turkey in Q3 2023.

·        Prices for supplies of Russian origin would need to move to steeper discount to shipments from Europe to boost Turkey’s interest in taking more Russian supplies.

·        Turkey’s stronger demand for Group I base oils over premium-grade base oils this year suggests that price and availability also influence Group I and premium-grade requirements.

·        Resumption of Turkey’s domestic base oils production from end-Q1 2023 boosts supply, could curb domestic buyers’ requirements for overseas supplies.

·        Turkey’s currency depreciation adds to attraction of procuring supplies from domestic producer.