· US base oils demand likely to stay muted as buyers focus on cutting stocks.· Consumption of existing stocks facilitates moves to cut inventories.· Expectations of rising surplus supply and lower prices add to incentive to hold back.· US Group II posted prices stay at unusually steep premium to domestic spot prices even after drop in posted prices in early-Nov 2024.· Unusually wide gap between postings and spot prices complicates price transparency, which could add to preference to maintain lower stocks. · Expectations of rising surplus supply and lower prices likely to curb buying interest in Latin America for US shipments..· Latin America’s lube demand likely to extend slowdown this and next month, curbing further buyers' requirements for additional supplies.· Latin America’s lube demand then likely to recover in Q1 2025..· Blenders would need to secure feedstock supplies soon to cover for any such pick-up in consumption in early 2025.· Blenders would likely initially tap any existing supply-overhang from the final months of this year to meet any rise in consumption.· Size of that supply-overhang would in turn determine timing of pick-up in demand for additional overseas supplies.· An early pick-up in demand would provide US with valuable outlet for surplus supplies early next year.· A later pick-up in demand would compound impact in US of likely rise in surplus supplies.· Either way, US would be key beneficiary of any pick-up in requirements, especially with less feasible arbitrage from other regions..· Prospect of more muted demand in Latin America increases need to boost buying interest in other outlets for US supplies.· CFR India Group II heavy-grade prices flip to premium to US export prices from H2 Oct 2024..· Premium to US export prices coincides with signs of pick-up in offers of supplies of US origin.· Premium would need to widen further to make arbitrage more feasible.· Premium would need to reflect expectations that India’s prices would be lower by the time any shipment from US reached the country.· Europe’s Group II heavy-grade base oils price premium to US export prices rises to widest in more than five months..· Wider premium boosts attraction of moving more US supplies to that market..· Europe Group II heavy-grade prices also widen their premium to regional Group II light grades and to Group I heavy neutrals.· Dynamic points to firmer supply-demand fundamentals for Europe Group II heavy grades.· Firm Group II heavy-grade prices contrast with prospect of increasingly muted base oils demand in Europe in coming weeks.· Europe’s lube demand likely to face seasonal dip in month of December before recovering at start of next year..· Seasonal slowdown in demand would compound signs of ongoing fall in outright lube consumption.· Fall in outright consumption then likely to curb size of recovery in demand at start of 2025.· Concern that consumption will extend contraction incentivizes blenders to maintain low base oils stocks.· Concern about demand weakness coincides with signs of healthy availability of base oils supply. · Healthy availability of supply gives blenders the leverage to procure smaller volumes more frequently as and when required..· Turkey’s demand for Group I base oils from Europe continues to shrink, while demand for base oils of Russian origin rises.· Base oils shipments from Russia as share of Turkey's total imports duly rise close to record-high level..· Dynamic reflects plentiful Group I supply of base oils of Russian origin and tighter supply from Europe.· Dynamic reflects growing price gap between supplies of Russian origin and supplies of European origin..· Dynamic continues to incentivize Turkey to import larger volume of lower-priced base oils from Russia, and to export more supplies to Europe.· Shipment of more supplies to Europe locks in higher prices in that market.· Turkey’s Group I base oils exports to Netherlands rise to multi-year high in Sept 2024, reflecting that trend..Asia base oils demand outlook: Week of 11 Nov.Global base oils margins outlook: Week of 11 Nov.Latam lube demand set to recover in Q1
