· US domestic base oils demand could get support from signs of more manageable surplus supply.· More manageable surplus curbs pressure on refiners to make sharp price adjustments to clear the volumes.· More manageable surplus curbs risk to buyers of exposure to sharp price adjustments.· Concern about such price adjustments is typically a factor that deters buyers at start of year.· Refiners’ moves to raise posted prices previously often triggered rise in demand as buyers sought to lock in supplies ahead of the price-rise.· Latest move to raise some posted prices could have more muted impact on demand.· But latest move to raise posted prices adds to signs of more manageable supply situation and curbs concern about exposure to lower spot prices.· Signs of slowdown in shipments to markets like West Africa and India so far this year raise risk of build-up of surplus supplies.· Slowdown in shipments could also add to signs of more manageable surplus supply, curbing need to line up additional arbitrage cargoes.· Planned plant maintenance work, and prospect of domestic demand starting to get a seasonal boost in coming weeks, could curb further the volume of spot supplies available for export.· Scenario would force overseas buyers seeking spot volumes to target supplies from other sources instead.· Exports still likely to account for large share of total US demand, but with term volumes accounting for even larger share of the shipments. .· US base oils exports account for 70% of total demand in Nov 2024..· Exports’ large share of demand highlights their key role in cushioning impact of weak domestic consumption.· Exports’ large share of demand highlights importance of maintaining high shipment volumes to overseas markets and prices that facilitate such moves.· US export price-discount to prices in markets like Europe and India steadies or narrows in recent weeks..· Steadier discounts could point to less urgency to move large volumes to overseas markets.· Dynamic would add to signs of more manageable supply and expectations of pick-up in domestic demand..· US Group III 4cSt base oils price premium stays weak vs Group II N100 price.· But Group III 4cSt premium stays unusually steady vs Group II N100 and at highest since end-July 2024, after bottoming out in Oct 2024..· Steadier Group III 4cSt premium at higher level could point to change in supply-demand fundamentals for Group III base oils..· Brazil’s base oils demand could get support from signs of smaller supply-overhang at start of year.· Brazil’s base oils supply lags demand in Dec 2024 for second time in three months..· Supply shortfall precedes seasonal pick-up in demand later in Q1 2025.· Buyers could have delayed moves to seek replenishment supplies in anticipation of lower prices and rising surplus availability in overseas markets like US at start of 2025.· Lack of any such drop in prices and signs of smaller surplus could prompt moves to lock in supplies.· Regular shipments from Argentina to Brazil from late-2024 extend into Q1 2025.· Additional Group I base oils supplies from Argentina point to insufficient supply in Brazil or to more competitive prices for imported shipments..· Argentina’s demand for overseas base oils supplies could rise once domestic lube consumption starts to revive.· Argentina’s imports as share of total base oils supply slumps in 2024..· Dynamic leaves domestic refiners’ Group I base oils accounting for unusually large share of total supply.· Any recovery in lube consumption would likely boost requirements for premium-grade base oils.· Buyers would need to tap overseas markets for those supplies.· US would be key beneficiary of any such development..· Europe’s base oils demand could see smaller-than-usual seasonal pick-up in requirements as buyers focus on maintaining low stocks.· Signs of sharp fall in lube demand at end-2024 likely left blenders with overhang of supplies, curbing size of replenishment volumes required.· Italy's lube demand slumps in Dec 2024, reflecting that dynamic..· Ongoing year-on-year slide in lube consumption magnifies seasonal slowdown at year-end, dulls boost from seasonal pick-up in demand ahead of spring oil-change season.· Blenders’ low stocks could magnify impact of supply-tightness of any base oils grades.· Strength of Group I brightstock prices reflects that dynamic.· Tighter brightstock supply could in turn boost blenders’ demand for additional volumes and larger stocks to ensure sufficient supplies to cover requirements. .US’ November base oils demand falls.Brazil’s Dec base oil supply lags demand.Argentina's December lube demand falls more slowly.Italy’s Dec lube demand extends fall.Asia base oils demand outlook: Week of 10 Feb.Global base oils margins outlook: Week of 10 Feb.Global base oils arb outlook: Week of 10 Feb
