Americas/EMEA base oils demand outlook: Week of 15 July

·        US base oils demand likely to get ongoing support until buyers are comfortable that they have sufficient stocks to cover against supply disruptions.

·        Signs of limited surplus supply and high crude oil prices could add further support.

·        Buying interest reflects more the impact of stock-building rather than end-user demand.

·        End-user demand would need to rise or supplies face disruptions to avoid US market facing large surplus at end of Q3 2024.

·        Buying interest could appear for supplies that are less likely to be impacted by weather-related disruptions, such as storage away from the US Gulf coast, or arbitrage shipments from Asia.

·        Latin America’s base oils demand shows signs of holding firm.

·        Region’s demand typically holds firm in the months of July and August before dipping in September.

·        US base oils exports to South America rise in May 2024 even as total US exports fall.

·        Rising exports to markets like Peru and Chile point to firm demand throughout the region, and highlight the region’s growing reliance on US supplies to cover most of its requirements.

·        That reliance could cause supply issues if US base oils production faces weather-related disruptions over the coming months.

·        Peru’s base oils/lube imports rise in June 2024 for second time in three months from year-earlier levels, adding to steady rise in shipments so far this year.

·        Chile’s base oils imports rise in June yoy and in Q2 2024 for third straight quarter.

·        Firm demand from markets like Peru and Chile could prompt buyers to eye more supplies from Asia in view of tighter availability in US and concern about weather-related supply disruptions.

·        Europe’s base oils demand is set to face a seasonal slowdown in the coming weeks, when lubricants production typically slows.

·        Blenders may be more comfortable seeking and holding larger volumes of Group I base oils in view of the tighter availability of the product.

·        Tight Group I supply and its increasingly narrow discount to Group II/III base oils is likely to keep eroding demand for the product.

·        Tight Group I supply contrasts with ready availability of premium-grade base oils, even with recent plant maintenance in Europe, logistical issues in the Red Sea and weather-related concerns in the US.

·        Mixed lube demand growth in Europe’s key markets so far this year likely to incentivize blenders to maintain lean stocks.

·        Tighter supply and rising prices for European Group I base oils boost Turkey’s demand for supplies from Russia.

·        Price gap between imported Group I supplies of Russian origin and supplies of Greek origin surges in May 2024 to widest since end-2022.

·        Price gap between imported supplies of Greek origin and supplies of Italian origin almost disappears as Group I supply in Europe tightens.

·        Turkey-bound cargoes of Greek origin were typically at a steep discount to supplies of Italian origin.

·        Share of Turkey’s imports from Russia rises to more than 30% in May 2024 from 25% from previous month.

·        Share from Europe falls to 37% in May 2024 from more than 50% the previous month.

·        Trend likely to continue in face of structural tightness of Europe’s Group I supply.

·        Rise in demand for Group I supplies of Russian origin likely to extend to and hold firm in other outlets like UAE and India amid scant availability and unworkable arbitrage for Europe supplies.

·        Recent pick-up in shipments to Nigeria show signs of continuing, with several cargoes from Europe and US set to reach the West African country in H1 Aug 2024.