Americas/EMEA base oils - week of Dec 11: Demand outlook

·        Americas/Europe base oils demand faces seasonal slowdown, pressure from lower feedstock prices.

·        US posted price-cuts likely to ease blenders’ concern about exposure to lower prices, supporting any underlying demand.

·        Posted price-cuts could complicate blenders’ moves to raise finished-lube prices in Q4 2023.

·        Posted price-cuts ease pressure on blenders to implement those moves.

·        Americas base oils demand could be firmer than usual as competitive US prices boost attraction of US supplies, curb feasibility of arbitrage shipments from other regions.

·        Any such pick-up in demand outside domestic US market has growing impact on US suppliers. 

·        US September base oils/lube exports account for more than 50pc of US’ total demand for seventh month in a row.

·        Rising exports support rise in US’ total demand in Sept 2023.

·        Exports accounted for more than 50pc of US’ total demand just once in 2022 and total of ten times during 2019-2021.

·        Trend highlights overseas markets’ growing importance as outlets to tap rising demand, to counter weaker domestic demand and to avoid build-up of surplus supplies.

·        Trend highlights importance of export prices that sustain firm demand in those overseas markets.

·        Trend could grow further in importance if US base oils production rises from this year’s lower-than-usual levels.

·        Argentina’s October lube demand rises for first time in four months.

·        Stronger lube demand adds to signs of firmer-than-expected lube consumption in Latin America in Q4 2023.

·        Firmer lube demand would boost requirements for base oils to produce lubricants, such as Group III base oils.

·        Firmer finished lube demand in the region would likely be insufficient to counter the impact of Mexico’s restrictions on base oils imports from end-Oct 2023.

·        Europe’s surplus of supply over demand falls more than 20pc in Q3 2023 from year-earlier levels.

·        Europe’s base oils demand could get support from more balanced supply-demand fundamentals even as consumption faces seasonal slowdown over coming weeks.

·        Europe’s Group II base oils demand could face pressure from concern about rise in supply as rising price-premium to other markets boosts attraction of moving more shipments to Europe.

·        Europe’s Group III base oils demand could get support from healthy availability and increasingly competitive prices vs Group I/II base oils.

·        Overseas demand for Europe base oils could face more downward pressure as more competitive US prices boost attraction of locking in supplies from that market instead.