· US base oils demand set to ebb as buyers focus on cutting inventories over coming weeks.· Lower base oils margins and prospect of smaller-than-expected surplus at start of Q4 2024 could curb downward price pressure over coming weeks.· Prospect of steadier-to-firm prices could support demand from buyers that had held back on concern about sharper price-drop..· Surplus could be smaller than expected after US exports outpace imports in Aug 2024 by largest volume in five months..· Surplus could stay lower at start of Q4 2024 following steady flow of shipments to markets like India, Nigeria and Turkey in recent weeks. · US Group III base oils demand could get support from prices that stay unusually competitive vs Group II prices..· Dynamic sustains incentive for blenders to boost consumption of Group III in place of Group II base oils..· Latin America’s base oils buyers likely to keep stocks at lower levels in anticipation of seasonal slowdown in lube consumption.· Demand could also get support from smaller-than-expected US supply surplus and less downward price pressure in response.· Demand for US supplies could get additional support from less feasible arbitrage to move cargoes from Asia to Americas..· Demand for US supplies from more distant markets like India could start to get more support as recent fall in outright prices boosts their competitiveness, especially for heavy grades.· US Group II heavy-grade discount to CFR India prices shrinks to narrowest since May 2024..· Arbitrage stays shut, but trend points to prospect of growing opportunities..· Europe’s base oils demand could get support from blenders’ moves to maintain lower stocks and procure smaller volumes more frequently.· Preference to maintain low stocks reflects concern that slowdown in Europe’s lube consumption has yet to bottom out.· Lube demand falls in Aug 2024 from year earlier in growing number of European countries..· Fall in demand compounds seasonal dip in consumption, leaves blenders’ stocks lasting longer.· Fall in lube demand cuts base oils demand, leaving markets like Italy with growing stocks..· Europe’s demand for Group I base oils could get support from more competitive prices compared with premium grades.· Recent production issues and upcoming plant maintenance could provide further support.· Recent weakness of Group I base oils prices relative to Group II/III prices could conversely reflect structural drop in demand for Group I base oils.· Any such structural pick-up in requirements for premium-grade base oils could cushion impact of recent rise in their premium relative to Group I base oils..· Turkey’s import price discount for Group I base oils from Russia vs base oils from Italy widens to more than $400/tonne in Aug 2024.· Discount is widest since end-2022..· Widening price discount adds to attraction of maximising imports and consumption of Group I supplies from Russia.· Widening price discount vs FOB domestic Europe Group I price adds to attraction of boosting Group I exports from Turkey to Europe..· Recent pick-up in shipments from Turkey to Europe duly extends into Aug 2024 for third month..Asia base oils demand outlook: Week of 14 Oct.Global base oils arb outlook: Week of 14 Oct.Global base oils margins outlook: Week of 14 Oct
