Americas/EMEA base oils - week of Jan 15: Demand outlook

·        US base oils demand likely to remain muted as firm prices, healthy availability incentivize buyers to hold off.

·        Wide spread between US domestic and export prices, and US posted prices and spot prices, add to attraction of holding back for now.

·        Latin America’s base oils demand faces prospect of slowing amid likely rise in regional supply.

·        Typical seasonal rise in Latin America’s lube demand in first quarter of the year could absorb higher regional output, sustain firm requirements for overseas supplies.

·        Competitive US export prices and closed arbitrage from Asia could provide further support to demand for US supplies.

·        US November base oils exports to Mexico hold steady vs Oct 2023, maintain narrower surplus vs Mexico’s lube demand.

·        Trend suggests Mexico’s demand for US base oils is unlikely to fall much further.

·        Trend still leaves US refiners seeking alternative outlets in place of much larger volumes that they moved to Mexico in first three quarters of 2023.

·        Argentina likely to prioritise shipments from US rather than other markets to cover any overseas requirements in view of more competitive US prices.

·        Argentina’s demand for US supplies holds firm in 2H 2023 as drop in arbitrage shipments balances out fall in domestic lube demand.

·        Demand for US supplies could still wane as sharp currency depreciation incentivizes Argentina to rely more on domestic supplies.

·        Latin America’s shortfall of supply versus demand widens in Oct 2023 close to its highest in years.

·        Shortfall widens as regional output slumps to multi-year low, while demand rises.

·        Trend boosts Latin America’s demand for overseas supplies in Q4 2023, especially from the US.

·        Expected pick-up in Latin America’s base oils output in Q1 2024 could curb size of requirements from overseas markets.

·        Europe blenders’ moves to maintain lower base oils stocks in 2023 could curb the volume of surplus supplies they needed to clear before end-2023, cushioning size of slowdown in demand at year-end/start of 2024.

·        Regional demand for Europe Group I/II base oils could still slow in short term following slump in region’s Group I export prices.

·        Any subsequent adjustment in Group I domestic prices could impact demand for Group II base oils.

·        Portugal’s November lube demand rises for fourth month.

·        Spain’s November lube demand rises for sixth month.

·        Higher demand adds to ongoing recovery in Mediterranean region, cushions size of seasonal dip in Europe’s consumption at year-end.

·        Europe’s October base oils demand rises from previous month while supply falls.

·        Trend slows build-up of regional supply surplus in Q4 2023.