· US base oils demand typically gets seasonal boost from around this time of the year.· Any such pick-up in demand in coming weeks could get further support following signs that sustained dip in domestic consumption is bottoming out.· Domestic demand in Q4 2024 rises from year-earlier levels for first time in two years, falls less than usual from previous quarter..· Signs of stabilising demand would boost blenders’ comfort with building larger stocks this year ahead of seasonal pick-up in consumption.· Uncertainty about impact of tariffs on end-user consumption could instead flip any recovery into reverse and trigger further slowdown in demand.· Uncertainty about impact of tariffs incentivizes blenders to avoid building larger stocks and to procure sufficient volumes to cover immediate requirements.· US export prices fall at time of year when typical rise in domestic demand curbs size of any surplus volumes.· US export prices fall ahead of pick-up in plant maintenance activity that is likely to tighten availability of spot volumes.· Unusual timing of fall in US export prices, when supply-demand fundamentals typically strengthen, adds to signs of concern about weaker-than-expected seasonal rise in demand.· Any slower-than-expected seasonal pick-up in domestic demand increases importance of overseas outlets to absorb any surplus volumes.· Lower US export prices widen their discount to prices in markets like India..· Wider discount facilitates arbitrage.· Overseas buyers could still hold back until they are comfortable that any further adjustment in US export prices is completed..· Latin America’s base oils demand likely to get support from balanced-to-tighter fundamentals in key markets in early 2025.· Brazil’s base oils surplus of supply over demand stays low in Jan 2025 and much lower than year-earlier levels..· Smaller surplus, combined with firm lube demand and prospect of seasonal rise in consumption from end-Q1 2025, likely to support firm requirements for replenishment supplies.· Any further rise in Brazil’s lube consumption would increase country’s reliance on overseas supplies, especially from US, to cover its requirements..· Concern about tariff-related supply disruptions could incentivize buyers to target more supplies from other sources instead of US..· Europe’s base oils demand likely to get boost from seasonal pick-up in requirements.· Demand for Group I base oils could get further support from signs of balanced-to-tight supply.· Steady-to-higher Group I base oils prices, even with lower feedstock costs, reflect signs of firmer supply-demand fundamentals.· Demand for Group II base oils could be more mixed, with recent price-weakness and healthier availability curbing urgency to lock in supplies. · Demand could face additional pressure from ongoing strength of Group II prices relative to Group III base oils..· Unusual premium to Group III prices boosts attraction of procuring more Group III supplies instead.· Unusual premium adds to concern about exposure to adjustment of Group II prices to more typical discount to Group III prices.· Competitiveness of Group III prices, and their supply sources, could get even more attractive if tariffs were to impact cost and flow of supplies between Europe and US..· Overseas demand for Europe Group I supplies shows signs of holding firm despite increasingly firm export prices relative to prices in destination markets like Middle East..· Firm demand suggests buyers face limited alternative choices from other suppliers.· US Group II N600 price-differential to Europe Group I SN 500 export price slides to widest discount in more than three months..· Widening discount likely to boost overseas buyers’ interest in US supplies in place of Europe Group I base oils..Global base oils margins outlook: Week of 10 March.Global base oils arb outlook: Week of 10 March.Asia base oils demand outlook: Week of 10 March.US’ December base oils demand falls.Brazil's Jan base oils supply exceeds demand.Base Oil News stories and analyses also available on the ICIS platform
