Americas/EMEA base oils demand outlook: Week of 13 October

·         US base oils demand could be steadier amid rangebound prices and signs of more muted pressure from any surplus supply.

·         US base oils demand typically rises in month of October from September, before falling in month of November.

·         Demand could be lower than usual as buyers and distributors work down stocks built up as buffer against weather-related supply disruptions during Atlantic hurricane season.

·         Surplus supply could also be lower than usual, balancing out lower demand.

·         Supply could be lower because of shutdown of key base oils unit for maintenance work, as well as pick-up in export cargoes to markets like India in final weeks of Q3 2025.

·         US domestic-price premium to export prices holds in relatively narrow range since start of Q2 2025 and into beginning of Q4 2025.

·         Steady price-differentials contrast with widening domestic-price premium around same time in 2023 and 2024 in response to growing downward pressure on export prices.

·         Extension of steady domestic/export price-differentials and steady margins point to more balanced fundamentals this time.

·         That dynamic could face pressure if overseas demand for US base oils weakens in response to any pick-up in availability of supplies from Asia.

·         That region’s supply-demand balance stays unusually tight in Jan-July 2025 before stronger pick-up in surplus volumes in Aug 2025.

·         Asia’s tighter supply-balance in Jan-July 2025 coincides with unusually wide US Group II heavy-grade price-discount to prices in markets like India.

·         Wide discount facilitates steady flow of surplus US supplies to India during that period.

·         Asia’s tighter supply-demand balance and firm prices also make less necessary and less feasible the arbitrage to Latin America.

·         Any further rise in surplus supply in Asia could boost competition for outlets like India, Middle East and Latin America and put pressure on those markets’ CFR prices.

·         Scenario could leave US suppliers facing challenge of rising shipments from other sources and possibility of needing to match more competitive prices in response.

·         Growing overseas supplies and rising competition could start to limit or reverse surge in US flows to Pakistan in past year.

·         US supplies account for close to 25% of Pakistan’s imports in first eight months of 2025, up from 16% in 2024 and less than 1% in 2023.

·         US already faces challenge of rising flows from Taiwan to Pakistan in 2025.

·         Trend could extend to other key suppliers like South Korea and Singapore in coming months.

·         Latin America’s base oils demand could be more muted in face of slack lube consumption, regulatory changes in Mexico and sufficient supply.

·         Brazil’s demand for additional supplies could ease after base oils imports rebound to ten-month high in Sept 2025.

·         Pick-up in imports helps to replenish lower stocks and cushion impact of any short-term domestic base oils production issues.

·         Expectations of healthy availability of supply in overseas markets over coming months add to incentive for buyers to maintain lean inventories.

·         Europe’s base oils demand could be more mixed.

·         Limited arbitrage opportunities to clear surplus Group I base oils leave more supplies within the region.

·         Open arbitrage to move more Group II base oils to Europe from markets like Asia could add to regional supply.

·         Prospect of healthy availability of supply gives blenders leverage to maintain lower stocks and procure smaller volumes as and when required.

·         Demand for Group III base oils could get support from signs of tighter availability extending well into Q4 2025.

·         Europe Group III 4cSt (low) price-premium to Group I and Group II base oils holds firm or rises further in recent weeks.

·         Group III price-differentials extend rise despite more attractive arbitrage to move additional supplies to Europe instead of to other markets.

·         Steady-to-firm prices and tighter-than-expected supply add to incentive to procure more supplies of Group III base oils.

·         Increasingly competitive prices for Group I base oils from Russia continue to dampen Turkey’s demand for shipments from Europe.

·         Turkey’s Group I imports from Europe fall to multi-year low in Aug 2025, while shipments from Russia hold steadier.

·          Falling shipments from Europe coincide with import-price for supplies from Europe that rises in Aug 2025 to highest premium in more than two years vs supplies originating from Russia.