· Americas’ base oils demand faces seasonal slowdown, cautious buying amid crude price volatility, and prospect of reversion to more typical demand trends from Brazil.· Expectation of sufficient supply gives blenders the flexibility to hold lower stocks.· US gasoline demand falls in early October for second week, reversing sustained recovery in consumption in through Q2-Q3 2023..· US’ August base oils imports fall for fourth month, reflecting slowdown in domestic Group III demand this year and increasingly weak Group III prices..· Rebound in US Group III prices versus Europe Group III prices in Q3 2023 incentivize refiners to move more shipments to US.· Any such pick-up in shipments would coincide with seasonal slowdown in US demand in Q4 2023.· Shipments reaching the US from Asia show signs of rising in September and October following slowdown in August..· Brazil’s base oils demand could start to slow as wave of imports outpaces fall in domestic base oils output in Q3 2023.· Surplus supply rises in response in three months to August to levels that leave market increasingly well covered for round of domestic plant maintenance work starting from Aug 2023..· Completion of plant maintenance by late-Q4 2023 and any lingering surplus supply could prompt buyers to cut demand for overseas supplies to avoid major supply-build. .· Mexico’s demand for US light-grade base oils could face pressure after rebound in US Group II light-grade prices versus heating oil since late-Aug 2023.· Any extension of rebound in US crude/heating oil prices over past week could alter those demand dynamics again.· Americas’ July lube demand rises from June, but more slowly than pick-up in regional output..· Any extension of that trend through Q3 2023 would trigger rise in surplus supplies, boosting importance of increasing exports and cutting imports..· Latin America’s September automobile sales rise for sixteenth time in seventeen months.· Auto sales rise strongly in Mexico and Argentina, flip back to growth in Brazil..· Europe’s base oils demand likely to wane even in markets showing firmer lube consumption as blenders eye year-end stock management.· Portugal’s August lube demand falls for fifth time in six months..· Trend incentivizes Europe’s blenders to maintain low lube and base oils stocks.· Trend could limit seasonal slowdown in regional base oils consumption in Q4 2023, with blenders’ stocks already at low levels..· Spain’s August lube demand rises for third month, highlighting increasingly diverse consumption trends throughout Europe..· Diverging pace of lube consumption in different countries in Europe incentivizes refiners to focus on growth regions as blenders use up feedstock supplies more quickly.· Blenders in growth markets in Europe likely to continue to maintain low stocks amid uncertainty about outlook and expectations of sufficient supply..· Turkey’s August Group I base oils imports from Russia rise to highest this year, while supplies from Europe fall..· Trend coincides with increasingly competitive prices for supplies of Russian origin..· Trend points to increasingly plentiful supplies in Russia and still-tight supplies in Europe.· Trend suggests the shipment of surplus supplies of Russian origin to overseas outlets takes priority over the price of the supplies.· Trend reflects the limited number of such overseas outlets and the importance of Turkey as one such outlet. · Trend coincides with and frees up supplies of Turkish origin to move to other markets like Africa.· One such shipment loads from Turkey in late-Aug 2023 before moving to Nigeria.· Trend cushions impact of limited surplus Group I supplies in Europe in Q3 2023.· Trend raises prospect of any surplus supplies in Europe in coming months facing growing competition for outlets like Africa and Mideast Gulf..· South Africa’s August base oils imports stay higher than usual, reflecting country’s total reliance on imports to cover its base oils requirements..· Supplies from key sources like US and Netherlands hold steady in first eight months of 2023 even as South Africa’s total imports rise.· Supplies instead rise strongly from Saudi Arabia and Belgium amid growing competition for the key outlet..· US exports to Nigeria almost pause in August as higher US prices make arbitrage less workable..· US exports to Nigeria revived in September on resumption of arbitrage flows.· Nigeria shows signs of attracting alternative supplies from other markets like Turkey, Russia and Asia.· Trend points to persistent global surplus supply and importance of Nigeria as key outlet to clear some of those supplies.· Trend curbs leverage for suppliers to raise prices without attracting alternative shipments from other sources..Global base oils - week of Oct 16: Demand outlook
· Americas’ base oils demand faces seasonal slowdown, cautious buying amid crude price volatility, and prospect of reversion to more typical demand trends from Brazil.· Expectation of sufficient supply gives blenders the flexibility to hold lower stocks.· US gasoline demand falls in early October for second week, reversing sustained recovery in consumption in through Q2-Q3 2023..· US’ August base oils imports fall for fourth month, reflecting slowdown in domestic Group III demand this year and increasingly weak Group III prices..· Rebound in US Group III prices versus Europe Group III prices in Q3 2023 incentivize refiners to move more shipments to US.· Any such pick-up in shipments would coincide with seasonal slowdown in US demand in Q4 2023.· Shipments reaching the US from Asia show signs of rising in September and October following slowdown in August..· Brazil’s base oils demand could start to slow as wave of imports outpaces fall in domestic base oils output in Q3 2023.· Surplus supply rises in response in three months to August to levels that leave market increasingly well covered for round of domestic plant maintenance work starting from Aug 2023..· Completion of plant maintenance by late-Q4 2023 and any lingering surplus supply could prompt buyers to cut demand for overseas supplies to avoid major supply-build. .· Mexico’s demand for US light-grade base oils could face pressure after rebound in US Group II light-grade prices versus heating oil since late-Aug 2023.· Any extension of rebound in US crude/heating oil prices over past week could alter those demand dynamics again.· Americas’ July lube demand rises from June, but more slowly than pick-up in regional output..· Any extension of that trend through Q3 2023 would trigger rise in surplus supplies, boosting importance of increasing exports and cutting imports..· Latin America’s September automobile sales rise for sixteenth time in seventeen months.· Auto sales rise strongly in Mexico and Argentina, flip back to growth in Brazil..· Europe’s base oils demand likely to wane even in markets showing firmer lube consumption as blenders eye year-end stock management.· Portugal’s August lube demand falls for fifth time in six months..· Trend incentivizes Europe’s blenders to maintain low lube and base oils stocks.· Trend could limit seasonal slowdown in regional base oils consumption in Q4 2023, with blenders’ stocks already at low levels..· Spain’s August lube demand rises for third month, highlighting increasingly diverse consumption trends throughout Europe..· Diverging pace of lube consumption in different countries in Europe incentivizes refiners to focus on growth regions as blenders use up feedstock supplies more quickly.· Blenders in growth markets in Europe likely to continue to maintain low stocks amid uncertainty about outlook and expectations of sufficient supply..· Turkey’s August Group I base oils imports from Russia rise to highest this year, while supplies from Europe fall..· Trend coincides with increasingly competitive prices for supplies of Russian origin..· Trend points to increasingly plentiful supplies in Russia and still-tight supplies in Europe.· Trend suggests the shipment of surplus supplies of Russian origin to overseas outlets takes priority over the price of the supplies.· Trend reflects the limited number of such overseas outlets and the importance of Turkey as one such outlet. · Trend coincides with and frees up supplies of Turkish origin to move to other markets like Africa.· One such shipment loads from Turkey in late-Aug 2023 before moving to Nigeria.· Trend cushions impact of limited surplus Group I supplies in Europe in Q3 2023.· Trend raises prospect of any surplus supplies in Europe in coming months facing growing competition for outlets like Africa and Mideast Gulf..· South Africa’s August base oils imports stay higher than usual, reflecting country’s total reliance on imports to cover its base oils requirements..· Supplies from key sources like US and Netherlands hold steady in first eight months of 2023 even as South Africa’s total imports rise.· Supplies instead rise strongly from Saudi Arabia and Belgium amid growing competition for the key outlet..· US exports to Nigeria almost pause in August as higher US prices make arbitrage less workable..· US exports to Nigeria revived in September on resumption of arbitrage flows.· Nigeria shows signs of attracting alternative supplies from other markets like Turkey, Russia and Asia.· Trend points to persistent global surplus supply and importance of Nigeria as key outlet to clear some of those supplies.· Trend curbs leverage for suppliers to raise prices without attracting alternative shipments from other sources..Global base oils - week of Oct 16: Demand outlook