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

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

·        US gasoline demand extends rise in early September for twenty-third week in twenty four.


·        US base oils/lube demand likely to get steady support from expectations of firm-to-higher prices.

·        Trend contrasts with incentive for blenders to delay procurement plans throughout 1H 2023 in face of regular posted-price cuts.

·        Wave of price-cuts compounded domestic lube demand weakness in 1H 2023 as blenders sought to trim inventories.

·        Higher prices now coincide with blenders’ lower stocks and seasonal pick-up in demand.

·        Signs of still-high US base oils exports in Q3 2023 cushion slowdown in domestic consumption, slows build-up of surplus supplies.

·        Latin America’s June lube consumption holds in narrow range as firmer demand in Brazil and Argentina counter slowdown in other key markets like Mexico.

·        Steadier consumption in 1H 2023 contrasts with more volatile demand in US, falling consumption in Europe and Asia.

Latam lube demand stays rangebound
Latam lube demand stays rangebound

·        Any slowdown in Latin America’s lube consumption would compound impact of demand weakness in those other markets.

·        Steady demand provides valuable outlet for US base oils supplies, especially with less feasible arbitrage from other markets.

·        Automobile sales in Latin America’s largest markets mostly hold firm or rise in August, extending strong growth for more than a year.

Auto sales mostly extend rise
Auto sales mostly extend riseAnfavea, Adefa, Inegi

·        Brazil’s July base oils supply stays high, maintaining surplus over demand close to nine-month high.

Surplus stays higher
Surplus stays higherANP, IBP

·        Higher-than-usual surplus for second month triggers supply-build ahead of scheduled plant maintenance in the country.

·        Rising surplus coincides with similar increase in surplus supplies in Argentina, reflecting pick-up in US shipments to South America’s largest markets.

·        Trend likely to curb impact of plant maintenance work in Brazil, could trigger slowdown in requirements if supply-build continues.

·        Europe’s base oils demand likely to get support from seasonal pick-up in consumption and balanced-to-tight supply.

·        Strength of pick-up in consumption likely to be lower than usual amid weak economic growth.

·        Strength of pick-up in consumption likely to be stronger than last year when blenders’ high stocks curbed need to replenish inventories.

·        Germany’s June lube demand falls for twenty-fourth month but at slowest pace in nine months.

·        Contraction highlights sustained pressure on demand in Germany, contrasts with steadier lube demand in other regions in Europe.

·        Slower pace of fall in Germany’s lube exports could provide some support if trend continues.

Demand stays weak
Demand stays weakBAFA

·        Germany’s June lube supply extends slide, slashing 1H 2023 supply to lowest in more than five years.

Lube supply tumbles
Lube supply tumblesBAFA

·        Germany’s sliding lube supply cuts requirements for feedstock base oils supplies.

·        Trend shows little sign of slowing.

·        Turkey’s rising Group I base oils imports in first seven months of 2023 reflect rise in shipments from Russia and Italy.

Imports hold firm
Imports hold firmTurkish Statistical Institute

·        Shipments from Italy recover after Mediterranean country’s supplies slumped in 1H 2022 because of extended plant shutdown.

·        Any further prolonged plant shutdown in Italy would likely curb its shipments again, leaving opportunity for further rise in shipments from Russia to Turkey.

·        West Africa’s buyers face additional challenge of securing sufficient supplies as availability of spot shipments tightens.

Americas/EMEA base oils - week of Sep 11: Demand outlook
Global base oils - week of Sep 11: Price outlook - arbitrage

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